Bond Market Update

Early Gains Extended

• U.S. Treasuries trade on their highs after adding to their initial gains with longer tenors maintaining their lead. Treasuries opened the day on a higher note, spending the initial hour in a sideways range near their starting levels. The first hour of trade saw a limited reaction to the ADP Employment Change report for January (183,000; Briefing.com consensus 155,000), which beat expectations and included an upward revision to the December reading (to 176,000 from 122,000). Treasuries inched to fresh highs after the final reading of the S&P Global U.S. Services PMI showed an uptick to 52.9 from 52.8 in the preliminary reading, though it was down notably from December's final reading (56.8). The market then saw another push to highs after the ISM Services Index (52.8%; Briefing.com consensus 53.9%; prior 54.1%) missed expectations, also showing a sequential deceleration in the pace of growth. With the early advance, the 10-yr yield is back below its 50-day moving average (4.482%), hovering at a level not seen in seven weeks, while the 2-yr yield has slid to an eight-week low. Equities are facing some early pressure with the Nasdaq (-0.7%) trailing the S&P 500 (-0.4%).
• Yield Check:
  • 2-yr: -5 bps to 4.17%
  • 3-yr: -6 bps to 4.19%
  • 5-yr: -8 bps to 4.24%
  • 10-yr: -8 bps to 4.43%
  • 30-yr: -9 bps to 4.66%