Bond Market Update

Five in a Row

• U.S. Treasuries climbed for the fifth consecutive day, pressuring yields to levels last seen during the first half of December. The trading day was off to a higher start after another quiet night on the global economic and news fronts. However, there was a growing sense of unease about global growth, evidenced by continued pressure on crude oil, which fell below $70/bbl, hitting a fresh low for the year. Treasuries built on their opening gains during the first couple hours of action, thanks in part to a weak open in stocks and the release of a disappointing Consumer Confidence Index for February (98.3; Briefing.com consensus 103.1). The market ranged near highs into the afternoon, holding steady through today's strong $70 bln 5-yr note offering, which followed yesterday's solid 2-yr note sale, setting the stage for a $44 bln 7-yr note auction tomorrow. Crude oil fell to its lowest level since late December while the U.S. Dollar Index fell 0.3% to 106.30.
• Yield Check:
  • 2-yr: -7 bps to 4.10%
  • 3-yr: -8 bps to 4.09%
  • 5-yr: -10 bps to 4.13%
  • 10-yr: -10 bps to 4.30%
  • 30-yr: -9 bps to 4.56%

• News:
  • Bank of England policymaker Dhingra spoke in favor of aggressive rate cuts.
  • The People's Bank of China left its one-year medium-term lending facility rate at 2.0%.
  • The Bank of Korea lowered its policy rate by 25 basis points to 2.75%, as expected, with just two policymakers open to additional cuts. The central bank lowered its domestic growth forecast for 2025 to 1.5% from 1.9%.
  • Japan's January Corporate Services Price Index was up 3.1% yr/yr (expected 2.9%; last 3.0%).
  • Hong Kong's January trade surplus reached $2.1 bln (last deficit of $34.5 bln) as imports rose 0.5% m/m (last -1.1%) and exports ticked up 0.1% m/m (last 5.2%).
  • Germany's Q4 GDP contracted 0.2% qtr/qtr, as expected (last 0.1%), falling 0.2% yr/yr, as expected (last -0.3%).
• Today's Data:
  • The Conference Board's Consumer Confidence Index dropped to 98.3 in February (Briefing.com consensus 103.1) from an upwardly revised 105.3 (from 104.1) in January. This was the largest monthly decline since August 2021.
    • The key takeaway from the report is that the drop in confidence was seen across all age groups with worries about tariffs, inflation, and future employment prospects driving the decline.
  • The S&P Case-Shiller Home Price Index was up 4.5% in December (Briefing.com consensus 4.4%) after being up 4.3% in November.
  • The FHFA Housing Price Index was up 0.4% in December after increasing 0.4% in November.
  • $70 bln 5-year Treasury auction results (prior 12-auction average):
    • High yield: 4.123% (4.211%).
    • Bid-to-cover: 2.42 (2.39).
    • Indirect bid: 74.9% (67.7%).
    • Direct bid: 14.5% (18.6%).
• Commodities:
  • WTI crude: -2.5% to $68.96/bbl
  • Gold: -1.5% to $2918.40/ozt
  • Copper: +0.2% to $4.53/lb
• Currencies:
  • EUR/USD: +0.4% to 1.0512
  • GBP/USD: +0.4% to 1.2670
  • USD/CNH: UNCH at 7.2533
  • USD/JPY: -0.4% to 149.06
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -6.6%)
  • 10:00 ET: January New Home Sales (Briefing.com consensus 681,000; prior 698,000)
  • 10:30 ET: Weekly crude oil inventories (prior +4.63 mln)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results