Bond Market Update

Six-Day Streak Snapped

• U.S. Treasuries retreated on Thursday, making for their first lower finish in seven days. Intraday action was largely uneventful, as 10s and 30s settled where they opened while shorter tenors finished a touch above their starting levels. Treasuries opened in the red after facing pressure in the futures market during the European session. Automaker stocks were particularly weak in European trade after President Trump said that he will soon officially announce a 25% tariff on European imports. The president also reminded that tariffs on imports from Canada and Mexico, and an additional 10% tariff on imports from China remain on track to be implemented on March 4 while reciprocal tariffs will go into effect on April 2. Today's retreat in Treasuries lifted the 10-yr yield back above its 200-day moving average (4.241%) while the 5-yr yield spent the day near the 200-day moving average of its own (4.113%). There was almost no reaction to today's economic data, which featured a larger-than-expected increase in jobless claims (242,000 from 220,000; Briefing.com consensus 220,000), an unrevised second reading of Q4 GDP (2.3%; Briefing.com consensus 2.3%), strong Durable Orders growth in January (3.1%; Briefing.com consensus 1.8%), though orders ex-transportation (0.0%; Briefing.com consensus 0.4%) missed estimates, and a larger-than-expected decrease in Pending Home Sales for January (-4.6%; Briefing.com consensus -0.8%). Tomorrow will bring the Personal Income/Outlays report for January, which will include the Fed's preferred inflation gauge—Core PCE Price Index (prior 2.8%). Crude oil climbed off its lowest level of the year while the U.S. Dollar Index climbed 0.8% to 107.24.
• Yield Check:
  • 2-yr: +1 bp to 4.08%
  • 3-yr: +2 bps to 4.06%
  • 5-yr: +3 bps to 4.10%
  • 10-yr: +4 bps to 4.29%
  • 30-yr: +5 bps to 4.55%

• News:
  • European Central Bank policymaker Stournaras said that it is too early to talk about a pause in the cutting cycle since rates remain restrictive.
  • China Securities Regulatory Commission has slowed approvals for U.S. IPOs of Chinese companies.
  • Bank of Thailand announced a surprise 25-basis point rate cut to 2.00%.
  • Australia's Q4 Building Capital Expenditure increased 0.2% qtr/qtr (last 1.1%) and Plant/Machinery Expenditure decreased 0.8% qtr/qtr (last 1.3%). Q4 Private New Capital Expenditure was down 0.2% qtr/qtr (expected 0.6%; last 1.6%).
  • New Zealand's February ANZ Business Confidence rose to 58.4 from 54.4.
  • Eurozone's February Business and Consumer Survey rose to 96.3 from 95.3 (expected 96.0). January M3 Money Supply grew 3.6% yr/yr (expected 3.8%; last 3.5%), January Private Sector Loans rose 1.3% yr/yr (expected 1.2%; last 1.1%) and loans to nonfinancials were up 2.0% yr/yr (last 1.5%).
  • France's January PPI was up 0.7% m/m (last 0.9%) but down 2.1% yr/yr (last -3.8%). January jobseekers rose to 3.162 mln from 2.957 mln.
  • Italy's February Business Confidence rose to 87.0 from 86.8, as expected, and Consumer Confidence rose to 98.8 from 98.2 (expected 98.4). December Industrial Sales were down 2.7% m/m (last 1.4%), falling 7.2% yr/yr (last -2.5%).
  • Spain's flash February CPI was up 0.4% m/m (expected 0.3%; last 0.2%), rising 3.0% yr/yr, as expected (last 2.9%).
  • Swiss Q4 GDP was up 0.2% qtr/qtr, as expected (last 0.4%), growing 1.5% yr/yr (expected 1.6%; last 1.9%).
• Today's Data:
  • Initial jobless claims for the week ending February 22 increased by 22,000 to 242,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending February 15 were 1867K (prior revised to 1867K from 1869K).
    • The key takeaway from the report is that initial jobless claims reached their highest level since early December, which will add to the market's festering concerns about a slowdown in growth. 
  • The second estimate for Q4 GDP was 2.3% (Briefing.com consensus 2.3%; prior 2.3%) while the second estimate for the Q4 GDP Deflator was 2.4% (Briefing.com consensus 2.2%; prior 2.2%). 
    • The key takeaway from the report is that the growth was driven largely by consumer spending and government spending, but with targeted efforts by the Trump administration to cut government spending and to implement tariffs, there will be concerns about GDP growth decelerating in coming quarters due to less of a contribution from consumer spending and government spending.
  • January Durable Goods Orders were up 3.1% (Briefing.com consensus 1.8%; prior revised to -1.8% from -2.2%). Excluding transportation, durable goods orders were flat (Briefing.com consensus 0.4%; prior revised to 0.1% from 0.3%).
    • The key takeaway from the report is that nondefense capital goods orders, excluding aircraft -- a proxy for business spending -- logged a healthy 0.8% increase in January, offsetting the headline disappointment of an unchanged reading for durable goods orders, excluding transportation. 
  • Pending Home Sales were down 4.6% month-over-month in January (Briefing.com consensus -0.8%) after decreasing a revised 4.1% (from -5.5%) in December.
  • Natural gas inventories decreased by 261 bcf after decreasing by 196 bcf a week ago.
• Commodities:
  • WTI crude: +2.5% to $70.36/bbl
  • Gold: -1.2% to $2895.20/ozt
  • Copper: +0.9% to $4.62/lb
• Currencies:
  • EUR/USD: -0.8% to 1.0403
  • GBP/USD: -0.5% to 1.2605
  • USD/CNH: +0.5% to 7.2978
  • USD/JPY: +0.4% to 149.66
• The Day Ahead:
  • 8:30 ET: January Personal Income (Briefing.com consensus 0.3%; prior 0.4%), Personal Spending (Briefing.com consensus 0.2%; prior 0.7%), PCE Prices (Briefing.com consensus 0.3%; prior 0.3%), and Core PCE Prices (Briefing.com consensus 0.3%; prior 0.2%), advance January International Goods trade balance (prior -$122.1 bln), advance Retail Inventories (prior -0.3%), and advance Wholesale Inventories (prior -0.5%) 
  • 9:45 ET: February Chicago PMI (Briefing.com consensus 41.2; prior 39.5)