Bond Market Update

Pushing Higher Ahead of PPI

• U.S. Treasuries are on track for a modestly higher start, looking to reclaim some of yesterday's losses, ahead of the 8:30 ET release of January PPI (Briefing.com consensus 0.2%; prior 0.2%) and January Core PPI (Briefing.com consensus 0.3%; prior 0.0%). Treasury futures spent the night in a steady ascent at a slow pace while other sovereign debt also advanced. The news flow was on the light side, though China offered to host a trilateral summit to negotiate an end to the war in Ukraine after President Trump said yesterday that negotiations with Russia will begin immediately. The U.S. Treasury will cap this week's note and bond auction slate with a sale of $25 bln in 30-yr bonds. Crude oil is falling back to its lowest level of the year while the U.S. Dollar Index is down 0.2% at 107.78.
• Yield Check:
  • 2-yr: -2 bps to 4.35%
  • 3-yr: -2 bps to 4.38%
  • 5-yr: -3 bps to 4.45%
  • 10-yr: -4 bps to 4.60%
  • 30-yr: -4 bps to 4.80%

• News:
  • Japan's Prime Minister Ishiba said that there are no current plans to review the government's accord with the Bank of Japan.
  • The European Central Bank's latest economic bulletin reaffirmed expectations for inflation slowing to 2.0% this year.
  • Japan's January PPI was up 0.3% m/m, as expected (last 0.4%), rising 4.2% yr/yr (expected 4.0%; last 3.9%).
  • Australia's MI Inflation Expectations increased to 4.6% from 4.0%.
  • New Zealand's January Electronic Card Retail Sales were down 1.6% m/m (last 2.4%), falling 0.5% yr/yr (last -1.0%). Q1 Inflation Expectations remained at 2.1%.
  • Eurozone's December Industrial Production was down 1.1% m/m (expected -0.6%; last 0.4%), falling 2.0% yr/yr (expected -3.1%; last -1.8%).
  • Germany's January CPI was down 0.2% m/m, as expected (last 0.5%) but up 2.3% yr/yr, as expected (last 2.6%).
  • U.K.'s Q4 GDP grew 0.1% qtr/qtr (expected -0.1%; last 0.0%), increasing 1.5% yr/yr (expected 1.0%; last 1.1%). Q4 Business Investment was down 3.2% qtr/qtr (expected -0.4%; last 1.9%), falling 0.7% yr/yr (last 4.4%). December Construction Output was down 0.2% m/m (expected 0.2%; last 0.6%) but up 1.5% yr/yr (expected 1.1%; last 1.0%). December Industrial Production rose 0.5% m/m (expected 0.2%; last -0.5%) but was down 1.9% yr/yr (expected -2.1%; last -2.0%). December Manufacturing Production was up 0.7% m/m (expected 0.0%; last -0.3%) but down 1.4% yr/yr (expected -1.9%; last -1.1%). December trade deficit reached GBP17.45 bln (expected deficit of GBP18.60 bln; last deficit of GBP18.90 bln).
  • Swiss January CPI was down 0.1% m/m, as expected (last -0.1%) but up 0.4% yr/yr, as expected (last 0.6%).
• Commodities:
  • WTI Crude: -1.4% to $70.35/bbl
  • Gold: +0.7% to $2948.30/ozt
  • Copper: +0.8% to $4.74/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0391
  • GBP/USD: +0.2% to 1.2469
  • USD/CNH: -0.1% to 7.3035 
  • USD/JPY: -0.3% to 153.84
• Data out Today:
  • 8:30 ET: January PPI (Briefing.com consensus 0.2%; prior 0.2%), January Core PPI (Briefing.com consensus 0.3%; prior 0.0%), weekly Initial Claims (Briefing.com consensus 217,000; prior 219,000), and Continuing Claims (prior 1.886 mln)
  • 10:30 ET: Weekly natural gas inventories (prior -174 bcf)
• Treasury Auctions:
  • 13:00 ET: $25 bln 30-yr Treasury bond auction results