Bond Market Update

Longer Tenors Build on Midweek Bounce

• Longer-dated U.S. Treasuries climbed on Thursday, making for an extension of yesterday's rebound off opening lows. The trading day started in positive territory with the market facing some early resistance, but the market held up as the 2-yr note stayed out of the red in morning trade, climbing alongside other tenors as the day went on. The 2-yr note eventually returned to little changed while longer tenors held onto the bulk of their gains. The advance helped Treasuries turn positive for the week with yields returning below their respective 50-day moving averages. Today's economic data was on the softer side, as weekly jobless claims (219,000; Briefing.com consensus 217,000; prior 214,000) increased more than expected while the Philadelphia Fed Survey for February (18.1; Briefing.com consensus 20.5; prior 44.3) was weaker than expected. Crude oil returned to its 50-day moving average (72.70) while the U.S. Dollar Index fell 0.8% to 106.36, returning to levels last seen in early December.
• Yield Check:
  • 2-yr: UNCH at 4.27%
  • 3-yr: -1 bp to 4.28%
  • 5-yr: -3 bps to 4.34%
  • 10-yr: -4 bps to 4.50%
  • 30-yr: -3 bps to 4.74%

• News:
  • Atlanta Fed President (non-voter) Bostic told CNBC that he continues expecting two rate cuts this year.
  • St. Louis Fed President (FOMC voter) Musalem said that the risk of disinflation stalling is greater than that of the labor market deteriorating.
  • Treasury Secretary Bessent said that any plan to increase the outstanding share of longer-dated Treasuries is "a long way off," according to Bloomberg.
  • Senator McConnell will retire at the end of his term.
  • A meeting between Ukraine's President Zelensky and a U.S. envoy was cancelled at the request of the U.S. shortly after starting.
  • European Central Bank policymaker Stournaras said that the disinflationary process remains on track.
  • Airbus missed quarterly expectations and issued soft delivery guidance.
  • The Chinese government will take steps to stabilize foreign investment, which has been contracting since mid-2023.
  • The People's Bank of China made no changes to its one-year and five-year loan prime rates.
  • Australia reported strong job growth for January, led by an unexpected rise in the participation rate.
  • South Korea's February Consumer Confidence rose to 95.2 from 91.2. January PPI was up 0.6% m/m (last 0.3%), rising 1.7% yr/yr (last 1.7%).
  • Hong Kong's January CPI was up 0.4% m/m (last 0.1%), rising 2.0% yr/yr (expected 1.8%; last 1.4%).
  • Australia's January Employment increased by 44,000 (expected 19,400; last 60,000) and full employment increased by 54,100 (last -23,700). January Unemployment Rate rose to 4.1% from 4.0%, as expected, and Participation Rate rose to 67.3% from 67.2% (expected 67.1%).
  • Eurozone's December Construction Output was unchanged m/m (last 0.6%).
  • Germany's January PPI was down 0.1% m/m (expected 0.6%; last -0.1%) but up 0.5% yr/yr (expected 1.3%; last 0.8%).
  • U.K.'s February CBI Industrial Trends Orders improved to -28 from -34 (expected -30).
  • Swiss January trade surplus reached CHF6.124 bln (expected surplus of CHF3.550 bln; last surplus of CHF3.480 bln).
• Today's Data:
  • Initial jobless claims for the week ending February 15 increased by 5,000 to 219,000 (Briefing.com consensus 217,000) while continuing jobless claims for the week ending February 8 increased by 24,000 to 1.869 million.
    • The key takeaway from the report is that it covers the period in which the household survey for the employment report is conducted, and with the continued low level of initial jobless claims, economists are apt to be expecting a fairly solid increase in February nonfarm payrolls.
  • The February Philadelphia Fed Index checked in at 18.1 (Briefing.com consensus 20.5) versus 44.3 in January. The dividing line between expansion and contraction for this series is 0.0, so the February reading is indicative of expansion, albeit at a slower pace than the prior month.
    • The key takeaway from the report is that new order activity decreased from January while the prices paid index and prices received index both increased from January.
  • Weekly crude oil inventories increased by 4.633 mln barrels after increasing by 4.07 mln barrels a week ago.
  • Weekly natural gas inventories decreased by 196 bcf after decreasing by 100 bcf a week ago.
• Commodities:
  • WTI crude: +0.6% to $72.49/bbl
  • Gold: +0.7% to $2955.60/ozt
  • Copper: +1.1% to $4.61/lb
• Currencies:
  • EUR/USD: +0.8% to 1.0499
  • GBP/USD: +0.7% to 1.2668
  • USD/CNH: -0.7% to 7.2337
  • USD/JPY: -1.1% to 149.80
• The Day Ahead:
  • 9:45 ET: Flash February S&P Global U.S. Manufacturing PMI (prior 51.2) and flash February S&P Global U.S. Services PMI (prior 52.9) 
  • 10:00 ET: January Existing Home Sales (Briefing.com consensus 4.06 mln; prior 4.24 mln) and final February University of Michigan Consumer Sentiment (Briefing.com consensus 67.8; prior 67.8)