Bond Market Update

Mixed Start Ahead

• U.S. Treasuries are on track for a mixed start with shorter tenors expected to see some early pressure amid concerns about the near-term inflationary impact of the weekend implementation of tariffs on imports from Canada (25%; 10% on energy), Mexico (25%), and China (10%) while the long end is set for a higher start on expectations of some negative impact to longer-term growth. In addition to tariff news, the start of the week brought a full slate of economic data from overseas. China's manufacturing sector remained in expansion in January by a slight margin, according to the Caixin Manufacturing PMI (50.1) while the eurozone's Manufacturing PMI reading was revised higher (to 46.6 from 46.1), but it remained in contraction. The U.S. session will also bring the final January S&P Global U.S. Manufacturing PMI (prior 50.1) at 9:45 ET, followed by the ISM Manufacturing Index (Briefing.com consensus 49.1%; prior 49.3%) at 10:00 ET. Crude oil is rising toward its 200-day moving average (74.77) while the U.S. Dollar Index is up 0.8% at 109.18.
• Yield Check:
  • 2-yr: UNCH at 4.24%
  • 3-yr: -1 bp to 4.27%
  • 5-yr: -4 bps to 4.32%
  • 10-yr: -6 bps to 4.51%
  • 30-yr: -8 bps to 4.73%

• News:
  • European Central Bank policymaker Knot said that the disinflationary process is proceeding "painlessly" with inflation headed for the 2.0% target.
  • French Prime Minister Bayrou could face a no-confidence vote as early as Wednesday as he attempts to push through a budget.
  • Standard & Poor's affirmed Germany's AAA rating with a Stable outlook.
  • China's January Caixin Manufacturing PMI hit 50.1 (expected 50.6; last 50.5).
  • Japan's January Manufacturing PMI hit 48.7 (expected 48.8; last 49.6).
  • South Korea's January trade deficit reached $1.89 bln (expected deficit of $1.28 bln; last surplus of $6.49 bln) as imports fell 6.4% yr/yr (expected -9.9%; last 3.3%) and exports decreased 10.3% yr/yr (expected -13.5%; last 6.6%). December Industrial Production was up 4.6% m/m (expected 0.4%; last -0.7%), rising 5.3% yr/yr (expected 0.7%; last 0.1%). December Retail Sales were down 0.6% m/m (last 0.4%) and December Service Sector Output was up 1.7% m/m (last -0.2%). January Manufacturing PMI hit 50.3 (last 49.0).
  • India's January Manufacturing PMI hit 57.7 (expected 58.0; last 56.4).
  • Hong Kong's December Retail Sales were down 9.7% yr/yr (last -7.3%). Flash Q4 GDP expanded 0.8% qtr/qtr (last -0.1%), growing 2.4% yr/yr (last 1.9%).
  • Australia's January ANZ Job Advertisements were up 0.2% m/m (last 0.3%). December Building Approvals rose 0.7% m/m (expected 0.9%; last -3.4%), increasing 5.6% yr/yr (last 7.1%). December Private House Approvals were down 3.0% m/m (last -1.7%). December Retail Sales dipped 0.1% m/m (expected -0.7%; last 0.8%). January Commodity Prices fell 11.9% yr/yr (last -10.7%).
  • Eurozone's January Manufacturing PMI hit 46.6 (expected 46.1; last 45.1). January CPI was down 0.3% m/m (last 0.4%) but up 2.5% yr/yr (expected 2.4%; last 2.4%). January Core CPI was down 1.0% m/m (last 0.5%) but up 2.7% yr/yr (expected 2.6%; last 2.7%).
  • Germany's January Manufacturing PMI hit 45.0 (expected 44.1; last 42.5).
  • U.K.'s January Manufacturing PMI hit 48.3 (expected 48.2; last 47.0).
  • France's January Manufacturing PMI hit 45.0 (expected 45.3; last 41.9).
  • Italy's January Manufacturing PMI hit 46.3 (expected 46.8; last 46.2). January CPI was up 0.6% m/m (expected 0.4%; last 0.1%), rising 1.5% yr/yr (last 1.3%).
  • Spain's January Manufacturing PMI hit 50.9 (expected 53.5; last 53.3).
  • Swiss January procure.ch Manufacturing PMI hit 47.5 (expected 49.0; last 48.4).
• Commodities:
  • WTI Crude: +2.6% to $74.46/bbl
  • Gold: +0.4% to $2844.50/ozt
  • Copper: -0.6% to $4.252/lb
• Currencies:
  • EUR/USD: -1.0% to 1.0255
  • GBP/USD: -0.4% to 1.2343
  • USD/CNH: +0.3% to 7.3414
  • USD/JPY: -0.4% to 154.57
• Data out Today:
  • 9:45 ET: Final January S&P Global U.S. Manufacturing PMI (prior 50.1)
  • 10:00 ET: December Construction Spending (Briefing.com consensus 0.2%; prior 0.0%) and January ISM Manufacturing Index (Briefing.com consensus 49.1%; prior 49.3%)