Bond Market Update

Inching Higher

• U.S. Treasuries are on track for a higher start, putting the 3-yr note and longer tenors on track for their third consecutive day of gains. Treasury futures inched higher during the Asian session, accelerating to highs once the focus turned to action in Europe. However, that move gave way to a pullback that returned Treasuries to levels from late evening. Overnight action featured the release of flash Manufacturing and Services PMI reading from major economies with Japan's flash Manufacturing PMI (48.9) remaining in contraction while flash Manufacturing and Services PMI readings from major European economies were mixed relative to expectations, though all pointed to continued weakness in manufacturing. Crude oil is giving back its gains from the past two days while the U.S. Dollar Index is up 0.3% at 106.65.
• Yield Check:
  • 2-yr: -1 bp to 4.26%
  • 3-yr: -1 bp to 4.27%
  • 5-yr: UNCH at 4.34%
  • 10-yr: -1 bp to 4.49%
  • 30-yr: -1 bp to 4.73%

• News:
  • Bank of Japan Governor Ueda said that the central bank is ready to react to rising bond yields and respond "nimbly if markets make abnormal moves."
  • Reserve Bank of Australia Governor Bullock repeated that the domestic economic outlook remains uncertain.
  • Germany will hold a snap election on Sunday, which is likely to result in new leadership. Observers will be particularly interested in the support received by the fast-growing AfD party.
  • Japan's January CPI was up 0.5% m/m (last 0.6%). January National CPI was up 4.0% yr/yr (last 3.6%) and National Core CPI was up 3.2% yr/yr (expected 3.1%; last 3.0%). Flash February Manufacturing PMI hit 48.9 (expected 49.0; last 48.7) and flash February Services PMI hit 53.1 (last 53.0).
  • India's flash February Manufacturing PMI hit 57.1 (last 57.7) and flash Services PMI hit 61.1 (last 56.5).
  • Australia's flash February Manufacturing PMI hit 50.6 (last 50.2) and flash Services PMI hit 51.4 (last 51.2).
  • New Zealand's January trade deficit reached NZD486 mln (expected surplus of NZD225 mln; last surplus of NZD94 mln).
  • Eurozone's flash February Manufacturing PMI hit 47.3 (expected 46.9; last 46.6) and flash Services PMI hit 50.7 (expected 51.5; last 51.3).
  • U.K.'s January Retail Sales rose 1.7% m/m (expected 0.4%; last -0.6%), increasing 1.0% yr/yr (expected 0.6%; last 2.8%). January Core Retail Sales rose 2.1% m/m (expected 0.9%; last -0.9%), increasing 1.2% yr/yr (expected 0.5%; last 2.1%). January Public Sector Net Borrowing was down GBP15.44 bln (expected -GBP20.10 bln; last GBP18.12 bln). Flash February Manufacturing PMI hit 46.4 (expected 48.5; last 48.3) and flash Services PMI hit 51.1 (expected 50.8; last 50.8).
  • Germany's flash February Manufacturing PMI hit 45.5 (expected 45.3; last 45.0) and flash Services PMI hit 52.2 (expected 52.4; last 52.5).
  • France's February Business Survey rose to 97 from 96 (expected 96). Flash February Manufacturing PMI hit 45.5 (expected 45.3; last 45.0) and flash Services PMI hit 44.5 (expected 48.8; last 48.2).
• Commodities:
  • WTI Crude: -0.8% to $71.89/bbl
  • Gold: -0.3% to $2949.30/ozt
  • Copper: -0.6% to $4.585/lb
• Currencies:
  • EUR/USD: -0.4% to 1.0462
  • GBP/USD: -0.2% to 1.2639
  • USD/CNH: +0.3% to 7.2569
  • USD/JPY: +0.6% to 150.46
• Data out Today:
  • 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)