Bond Market Update

Treasuries Slide Ahead of January CPI

• U.S. Treasuries ended Tuesday in the red, lifting yields to one-week highs ahead of tomorrow's release of January CPI (Briefing.com consensus 0.3%; prior 0.4%), and January Core CPI (Briefing.com consensus 0.3%; prior 0.2%). Intraday action was uneventful, as the market closed essentially where it opened after overnight pressure on Treasury futures and other sovereign debt as the White House confirmed the new 25% tariff on aluminum and steel imports. Fed Chairman Powell's first day of testimony on Capitol Hill did not produce any surprises with Mr. Powell maintaining the same tone that was seen in the most recent FOMC press conference. The market continued meandering through a strong $58 bln 3-yr note auction that stopped through by more than a basis point, breaking a streak of five consecutive tailing auctions in that tenor. Tomorrow, the Treasury will sell $42 bln in 10-yr notes. Crude oil climbed to a one-week high while the U.S. Dollar Index fell 0.3% to 107.92, returning to its 50-day moving average (107.92).
• Yield Check:
  • 2-yr: +2 bps to 4.29%
  • 3-yr: +2 bps to 4.31%
  • 5-yr: +4 bps to 4.37%
  • 10-yr: +4 bps to 4.54%
  • 30-yr: +4 bps to 4.75%

• News:
  • Australian Prime Minister Albanese said that President Trump agreed to consider a tariff exemption for steel imports from Australia.
  • South Korea's exports rose 0.8% yr/yr during the first ten days of February with chip exports increasing 1.8%.
  • South Korean think tank KDI lowered its domestic growth forecast for 2025 to 1.6% from 2.0%.
  • Germany's steelmaker association believes that new U.S. tariffs on steel and aluminum imports will divert more production volume to Europe.
  • French Prime Minister Bayrou survived another no-confidence vote.
  • Bank of England policymaker Mann said that inflation is becoming less of a threat as corporate power weakens.
  • Australia's February Westpac Consumer Sentiment ticked up 0.1% (last -0.7%). January NAB Business Survey fell to 3 from 6 and Business Confidence rose to 4 from -2.
  • France's Q4 Unemployment Rate dipped to 7.3% from 7.4% (expected 7.5%).
• Today's Data:
  • The NFIB Small Business Optimism Index fell to 102.8 in January from 105.1 in December.
  • $58 bln 3-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.300% (4.197%).
    • Bid-to-cover: 2.79 (2.57).
    • Indirect bid: 74.0% (65.4%).
    • Direct bid: 15.8% (18.1%).
• Commodities:
  • WTI crude: +1.3% to $73.32/bbl
  • Gold: -0.1% to $2932.80/ozt
  • Copper: -2.3% to $4.60/lb
• Currencies:
  • EUR/USD: +0.5% to 1.0360 
  • GBP/USD: +0.6% to 1.2439
  • USD/CNH: UNCH at 7.3086
  • USD/JPY: +0.3% to 152.48
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 2.2%)
  • 8:30 ET: January CPI (Briefing.com consensus 0.3%; prior 0.4%), and January Core CPI (Briefing.com consensus 0.3%; prior 0.2%)
  • 10:30 ET: Weekly crude oil inventories (prior +8.66 mln)
  • 14:00 ET: January Treasury Budget (prior -$87.0 bln)
• Treasury Auctions:
  • 13:00 ET: $42 bln 10-yr Treasury note auction results