Bond Market Update

10-Yr Yield Back Above 50-Day Average

• U.S. Treasuries began the holiday-shortened week with losses across the curve that lifted yields on all tenors back above their 50-day moving averages. The bulk of the day's selling took place at the open after a night of steady selling in Treasury futures and other sovereign debt. That included continued weakness in JGBs with Japan's 10-yr yield rising past 1.42% to a level not seen since late 2009 after Japan reported strong GDP for Q4 (0.7%; expected 0.3%; last 0.4%). Treasuries spent the first three hours of action in a sideways range near their opening levels, slipping to fresh lows in the afternoon. The retreat put an end to two days of gains with yields on the 10-yr note (4.519%) and longer tenors rising back above their 50-day moving averages. Crude oil reclaimed its loss from Friday while the U.S. Dollar Index rose 0.4% to 107.03.
• Yield Check:
  • 2-yr: +4 bps to 4.30%
  • 3-yr: +5 bps to 4.32%
  • 5-yr: +7 bps to 4.39%
  • 10-yr: +7 bps to 4.54%
  • 30-yr: +7 bps to 4.76%

• 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%).
• Today's Data:
  • The Empire State Manufacturing Index hit 5.7 in February (Briefing.com consensus -2.0), up from -12.6 in January.
  • The NAHB Housing Market Index fell to 42 in February (Briefing.com consensus 47) from 47 in January.
• Commodities:
  • WTI crude: +1.6% to $71.81/bbl
  • Gold: +1.7% to $2950.10/ozt
  • Copper: -1.7% to $4.58/lb
• Currencies:
  • EUR/USD: -0.4% to 1.0443
  • GBP/USD: -0.2% to 1.2597
  • USD/CNH: +0.2% to 7.2761
  • USD/JPY: +0.3% to 151.96
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 2.3%)
  • 8:30 ET: January Housing Starts (Briefing.com consensus 1.400 mln; prior 1.499 mln) and Building Permits (Briefing.com consensus 1.450 mln; prior 1.483 mln)
  • 14:00 ET: January FOMC Minutes
• Treasury Auctions:
  • 13:00 ET: $16 bln 20-yr Treasury bond auction results