Bond Market Update

Opening Weakness Reversed

• U.S. Treasuries recorded their fourth consecutive day of gains after overcoming a soft start. The trading day started with modest losses in the 10-yr note and shorter tenors. Those losses were extended during the first hour of action, but the Treasury complex bounced as equities opened on a weak note. The rebound pressured yields to their lowest levels of the year with the market defending its bounce thanks in part to some help from a strong $69 bln 2-yr Treasury note auction, which precedes tomorrow's $70 bln 5-yr note offering. Crude oil set a fresh low for the year before bouncing while the U.S. Dollar Index was little changed at 106.57, remaining at levels last seen in early December.
• Yield Check:
  • 2-yr: -2 bps to 4.17%
  • 3-yr: -3 bps to 4.17%
  • 5-yr: -3 bps to 4.23%
  • 10-yr: -3 bps to 4.39%
  • 30-yr: -2 bps to 4.65%

• News:
  • House Speaker Johnson said that he expects to pass a budget bill this week.
  • Germany's snap election resulted in CDU/CSU receiving nearly 29.0% of the vote, followed by 20.8% for AfD, and 16.4% for Chancellor Scholz's SPD. CDU/CSU will reportedly seek to form a coalition with SPD
  • European Central Bank policymaker Wunsch warned that the ECB could "sleepwalk" into too many rate cuts.
  • The Trump administration is reportedly planning to impose large fees on ships owned or built in China.
  • Former Bank of Japan official Shirai said that the Bank of Japan could raise its policy rate to 0.75% in March if the U.S. imposes tariffs.
  • Singapore's January CPI was down 0.8% m/m (last 0.3%) but up 1.2% yr/yr (expected 2.2%; last 1.5%). January Core CPI was up 0.8% yr/yr (expected 1.5%; last 1.7%).
  • New Zealand's Q4 Retail Sales rose 0.9% qtr/qtr (expected 0.5%; last 0.0%), growing 1.4% qtr/qtr (expected 0.2%; last -0.6%).
  • Eurozone's January CPI was down 0.3% m/m, as expected (last 0.4%) but up 2.5% yr/yr, as expected (last 2.4%). January Core CPI was down 0.9% m/m (expected -1.0%; last 0.5%) but up 2.7% yr/yr, as expected (last 2.7%).
  • Germany's February ifo Business Climate Index remained at 85.2 (expected 85.9). February Current Assessment fell to 85.0 from 86.0 (expected 86.5) and Business Expectations rose to 85.4 from 84.3 (expected 85.2).
• Today's Data:
  • $69 bln 2-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.169% (4.382%).
    • Bid-to-cover: 2.56 (2.64).
    • Indirect bid: 85.5% (67.6%).
    • Direct bid: 7.6% (19.2%).
• Commodities:
  • WTI crude: +0.5% to $70.70/bbl
  • Gold: +0.4% to $2963.70/ozt
  • Copper: -0.4% to $4.52/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0474
  • GBP/USD: UNCH at 1.2632
  • USD/CNH: UNCH at 7.2507
  • USD/JPY: +0.2% to 149.62
• The Day Ahead:
  • 9:00 ET: December FHFA Housing Price Index (prior 0.3%) and December S&P Case-Shiller Home Price Index (Briefing.com consensus 4.4%; prior 4.3%)
  • 10:00 ET: February Consumer Confidence (Briefing.com consensus 103.1; prior 104.1)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results