Bond Market Update

Long End Leads Early Weakness

• U.S. Treasuries are on track for a lower start after Monday's holiday closure. Treasury futures began inching lower on Sunday evening, adding to their losses on Monday night. The selling took place alongside weakness in other sovereign debt, including Japan's. The latest wave of pressure followed Sunday night's release of above-consensus GDP for Q4 (0.7%; expected 0.3%; last 0.4%), driving Japan's 10-yr yield to a level not seen since late 2009. Elsewhere, the Reserve Bank of Australia announced a 25-basis point rate cut but also warned against expectations for more cuts down the road. The U.S. session will not feature any top-tier data today, but tomorrow will bring a $16 bln 20-yr bond auction. Crude oil is fighting to stay above its lowest level of the year while the U.S. Dollar Index is up 0.4% at 106.97.
• Yield Check:
  • 2-yr: +2 bps to 4.28%
  • 3-yr: +2 bps to 4.29%
  • 5-yr: +4 bps to 4.36%
  • 10-yr: +4 bps to 4.51%
  • 30-yr: +4 bps to 4.73%

• News:
  • The Reserve Bank of Australia lowered its cash rate by 25 basis points to 4.10%, as expected, making for the first rate cut since 2020. Governor Bullock warned that the market is overestimating the likelihood of additional cuts.
  • China's National Development Reform Commission signaled that policies to support private businesses will be implemented.
  • South Korea's January trade deficit reached $1.89 bln (last surplus of $400 mln) as exports fell 10.2% yr/yr (expected -10.3%; last 6.6%) and imports dropped 6.4% yr/yr, as expected (last 3.3%).
  • Hong Kong's January Unemployment Rate remained at 3.1%.
  • Eurozone's February ZEW Economic Sentiment hit 24.2 (expected 24.3; last 18.0).
  • Germany's February ZEW Economic Sentiment rose 26.0 from 10.3 (expected 19.9) and ZEW Current Conditions rose to -88.5 from -90.4 (expected -90.0).
  • U.K.'s December three-month employment increased by 107,000 (last 35,000) and December Unemployment Rate remained at 4.4% (expected 4.5%). December Average Earnings Index + Bonus was up 6.0% yr/yr (expected 5.9%; last 5.5%). Q3 Labour Productivity was down 2.4% (expected -0.8%; last -0.9%).
  • France's January CPI was up 0.1% m/m (expected -0.1%; last 0.2%), rising 1.7% yr/yr (expected 1.4%; last 1.3%).
  • Swiss Q4 Industrial Production was up 2.3% yr/yr (last 3.1%).
• Commodities:
  • WTI Crude: +0.6% to $71.17/bbl
  • Gold: +1.0% to $2930.90/ozt
  • Copper: -1.6% to $4.589/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0458
  • GBP/USD: -0.3% to 1.2590
  • USD/CNH: +0.3% to 7.2825
  • USD/JPY: +0.2% to 151.74
• Data out Today:
  • 8:30 ET: February Empire State Manufacturing (Briefing.com consensus -2.0; prior -12.6)
  • 10:00 ET: February NAHB Housing Market Index (Briefing.com consensus 47; prior 47)
  • 16:00 ET: December Net Long-Term TIC Flows (prior $79.0 bln)