Bond Market Update

January CPI Ahead

• U.S. Treasuries are on track for a largely flat start with a slight downward bias ahead of the 8:30 ET release of January CPI (Briefing.com consensus 0.3%; prior 0.4%), and January Core CPI (Briefing.com consensus 0.3%; prior 0.2%). The market is eager to see the report because it will factor into fed funds rate expectations. Overnight action saw some early weakness during the Asian session, followed by a slow rebound as the night went on. Things were quiet on the global economic front again, while in news, there is renewed uncertainty whether Australia will receive an exemption from new U.S. tariffs on steel and aluminum imports. Meanwhile, Japan has also requested to be excluded from these tariffs. On the same subject, President Trump is expected to announce reciprocal tariffs this afternoon. Crude oil is giving back yesterday's gain while the U.S. Dollar Index is little changed at 107.94.
• Yield Check:
  • 2-yr: +1 bp to 4.30%
  • 3-yr: UNCH at 4.31%
  • 5-yr: +1 bp to 4.38%
  • 10-yr: UNCH at 4.54%
  • 30-yr: +1 bp to 4.76%

• News:
  • China is reportedly tightening rules on new copper smelters to reduce overcapacity.
  • Bank of France expects domestic growth of just 0.1% to 0.2% in Q1.
  • Japan's January M2 Money Stock was up 1.3% yr/yr, as expected (last 1.3%), and January Machine Tool Orders rose 4.7% yr/yr (last 12.6%).
  • India's January CPI was up 4.31% yr/yr (expected 4.60%; last 5.22%). December Industrial Production rose 3.2% yr/yr (expected 3.9%; last 5.0%) and Manufacturing Output rose 3.0% m/m (last 5.5%).
  • Italy's December Industrial Production was down 3.1% m/m (expected -0.1%; last 0.3%), falling 7.1% yr/yr (last -1.6%).
• Commodities:
  • WTI Crude: -1.2% to $72.47/bbl
  • Gold: -0.8% to $2909.80/ozt
  • Copper: +0.4% to $4.618/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0372
  • GBP/USD: +0.1% to 1.2451
  • USD/CNH: +0.1% to 7.3151
  • USD/JPY: +0.8% to 153.57
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 2.3%; 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