Bond Market Update

Market Keeps Eye on Tariffs

• U.S. Treasuries are on track for a modestly lower start with longer tenors expected to show relative weakness in the early going. The news flow has been relatively light to begin the new week, though tariffs remain in focus after President Trump said that a 25% duty will be assessed on steel and aluminum imports into the United States. In addition, the president said that there could be irregularities in the U.S. Treasury market, but did not offer details. Treasury futures navigated a sideways range through the night alongside limited movement from other sovereign debt. China's CPI was a touch cooler than expected in January (0.7%; expected 0.8%) while PPI remained in deflation (-2.3% yr/yr). Crude oil is returning to its 50-day moving average (72.22) while the U.S. Dollar Index is up 0.2% at 108.26.
• Yield Check:
  • 2-yr: UNCH at 4.28%
  • 3-yr: UNCH at 4.30%
  • 5-yr: +1 bp to 4.34%
  • 10-yr: UNCH at 4.49%
  • 30-yr: +1 bp to 4.70%

• News:
  • Japan's Prime Minister Ishiba told President Trump during their meeting that Japan's investment in the U.S. will increase to $1 trln and that Japan will double its defense spending by 2027 and import more energy from the U.S.
  • German Chancellor Scholz said that the EU is ready to offer a quick response if U.S. tariffs target European goods.
  • China's January CPI was up 0.7% m/m (expected 0.8%; last 0.0%), rising 0.5% yr/yr (expected 0.4%; last 0.1%). January PPI was down 2.3% yr/yr (expected -2.2%; last -2.3%).
  • Japan's January Economy Watchers Current Index fell to 48.6 from 49.0 (expected 49.7) and January Bank Lending was up 3.0% yr/yr (expected 3.1%; last 3.0%). December Current Account surplus reached JPY2.73 trln, as expected last surplus of JPY3.03 trln).
  • Australia's December Building Approvals rose 0.7% m/m, as expected (last -3.4%) and Private House Approvals fell 3.0% m/m, as expected (last -1.7%).
  • Eurozone's February Sentix Investor Confidence rose to -12.7 from -17.7 (expected -16.4).
• Commodities:
  • WTI Crude: +1.3% to $71.91/bbl
  • Gold: +1.5% to $2929.90/ozt
  • Copper: +0.8% to 4.624/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0314
  • GBP/USD: -0.1% to 1.2388
  • USD/CNH: +0.1% to 7.3111
  • USD/JPY: +0.5% to 152.07
• No Data on Today's Schedule