Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a modestly lower start ahead of the 8:30 ET release of the Personal Income/Outlays report for December, which will factor into the market's rate expectations. The lower start will follow a busy night on the global economic front, which included the release of Japan's Tokyo CPI for December (3.4% yr/yr), coupled with above-consensus December Retail Sales (3.7% yr/yr) and Industrial Production (0.3% m/m). In Europe, Germany reported falling retail sales for January (-1.6% m/m) and an uptick in the Unemployment Rate (6.2% from 6.1%), continuing a string of weak data. Reported not long ago, Germany's CPI decelerated to 2.3% from 2.6% yr/yr in the flash reading for January. There is still some uncertainty about the tariff picture in the near-term, considering a 25% tariff on imports from Mexico and Canada is expected to go into effect tomorrow, but The Wall Street Journal reported that President Trump's advisers are still looking for ways to avoid implementing universal tariffs. Crude oil continues hovering near its 50-day moving average (72.10) while the U.S. Dollar Index is up 0.5% at 108.28.
• Yield Check:
  • 2-yr: +1 bp to 4.21%
  • 3-yr: +1 bp to 4.25%
  • 5-yr: +1 bp to 4.32%
  • 10-yr: +2 bps to 4.53%
  • 30-yr: +1 bp to 4.77%

• News:
  • The U.S. government is launching a probe to see if DeepSeek evaded restrictions on exports of advanced chips to China by purchasing them through Singapore.
  • There is speculation that the European Central Bank will announce another rate cut in March and stop referring to its policy as "restrictive."
  • The European Central Bank's December Survey of Professional Forecasters raised the harmonized inflation forecast for the eurozone to 2.1% from 1.9% and cut the GDP growth forecast to 1.0% from 1.2%.
  • Japan's January Tokyo CPI was up 3.4% yr/yr (last 3.0%) and Tokyo Core CPI was up 2.5% yr/yr, as expected (last 2.4%). December Retail Sales rose 3.7% yr/yr (expected 3.4%; last 2.8%), December Industrial Production ticked up 0.3% m/m (expected -0.1%; last -2.2%), December jobs/applications ratio remained at 1.25, as expected, and December Unemployment Rate fell to 2.4% from 2.5% (expected 2.5%). December Housing Starts fell 2.5% yr/yr (expected -3.7%; last -1.8%) and Construction Orders rose 8.1% yr/yr (last -10.2%).
  • India's December Infrastructure Output was up 4.0% yr/yr (last 4.3%). December Bank Loans grew 11.5% yr/yr (last 11.2%) and Deposits Grew 10.8% yr/yr (last 9.8%).
  • Singapore's December Bank Lending reached SGD835.0 bln (last SGD819.4 bln). Q4 Business Expectations decreased to 7.0 from 10.0.
  • Australia's Q4 PPI was up 0.8% qtr/qtr (expected 1.0%; last 1.0%), rising 3.7% yr/yr (last 3.9%). December Housing Credit was up 0.5% m/m, as expected (last 0.5%).
  • Germany's December Retail Sales fell 1.6% m/m (expected 0.0%; last -0.1%) but were up 1.8% yr/yr (expected 2.5%; last 2.9%). January Unemployment increased by 11,000 (expected 14,000; last 10,000) and Unemployment Rate rose to 6.2% from 6.1%, as expected. Flash January CPI -0.2% m/m (expected 0.1%; last 0.5%); 2.3% yr/yr (expected 2.6%; last 2.6%).
  • U.K.'s January Nationwide HPI was up 0.1% m/m (expected 0.3%; last 0.7%), rising 4.1% yr/yr (expected 4.3%; last 4.7%).
  • France's January CPI was down 0.1% m/m (expected 0.0%; last 0.2%) but up 1.4% yr/yr (expected 1.5%; last 1.3%). December PPI was up 1.0% m/m (last 3.7%) but down 3.8% yr/yr (last -4.7%).
  • Italy's December PPI was up 0.6% m/m (last 1.2%), rising 1.1% yr/yr (last -0.5%).
  • Spain's December Retail Sales rose 4.0% yr/yr (expected 0.5%; last 0.9%). November Current Account surplus reached EUR1.26 bln (last surplus of EUR4.93 bln).
  • Swiss December Retail Sales rose 2.6% yr/yr (expected 0.6%; last 1.4%).
• Commodities:
  • WTI Crude: UNCH at $72.74/bbl
  • Gold: +0.1% to $2846.50/ozt
  • Copper: -0.5% to $4.287/lb
• Currencies:
  • EUR/USD: UNCH at 1.0384
  • GBP/USD: +0.1% to 1.2423
  • USD/CNH: +0.1% to 7.2966
  • USD/JPY: +0.4% to 154.87
• Data out Today:
  • 8:30 ET: December Personal Income (Briefing.com consensus 0.4%; prior 0.3%), Personal Spending (Briefing.com consensus 0.5%; prior 0.4%), PCE Prices (Briefing.com consensus 0.3%; prior 0.1%), Core PCE Prices (Briefing.com consensus 0.2%; prior 0.1%), and Q4 Employment Cost Index (Briefing.com consensus 0.9%; prior 0.8%)
  • 9:45 ET: January Chicago PMI (Briefing.com consensus 41.5; prior 36.9)