Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a modestly lower start after two days of gains. Treasury futures spent the early portion of the overnight session in a sideways range, slipping to lows shortly after the start of the European session. It was a relatively quiet night in terms of global economic reports and news developments. Bank of Japan policymaker Tamura said that the BoJ needs to raise its policy rate to 1.00% by the second half of the year, which he believes is around the neutral level. In Europe, the Bank of England announced a 25-basis point rate cut to 4.50%, which was expected. The U.S. data slate will feature the 8:30 ET release of Preliminary Q4 Productivity (actual 0.8%; prior 2.2%), Unit Labor Costs (Briefing.com consensus 2.6%; prior 0.8%), and weekly Initial Claims (Briefing.com consensus 213,000; prior 207,000). Crude oil is looking to reclaim some of yesterday's loss while the U.S. Dollar Index is up 0.4% at 108.03, climbing back above its 50-day moving average (107.80).
• Yield Check:
  • 2-yr: +2 bps to 4.20%
  • 3-yr: +2 bps to 4.22%
  • 5-yr: +3 bps to 4.27%
  • 10-yr: +2 bps to 4.44%
  • 30-yr: +2 bps to 4.66%

• News:
  • Treasury Secretary Bessent said that President Trump's focus is to lower the 10-yr yield, not the fed funds rate, according to Bloomberg.
  • Japan's Prime Minister Ishiba will meet with President Trump this weekend.
  • Fitch affirmed South Korea's AA- rating with a Stable outlook.
  • British Prime Minister Starmer is reportedly seeking ways to boost his party's popularity.
  • Shipper Maersk reported solid results for Q4 but also said it does not expect the normalization of routes through the Red Sea in the near term.
  • South Korea's December Current Account surplus reached $12.37 bln (last surplus of $10.05 bln).
  • Australia's December trade surplus reached AUD5.085 bln (expected surplus of AUD6.520 bln; last surplus of AUD6.792 bln) as imports rose 5.9% m/m (last 1.4%) and exports rose 1.1% m/m (last 4.2%). Q4 NAB Quarterly Business Confidence fell to -4 from -2.
  • Eurozone's December Retail Sales fell 0.2% m/m (expected -0.1%; last 0.0%) but were up 1.9% yr/yr, as expected (last 1.6%).
  • Germany's December Factory Orders rose 6.9% m/m (expected 1.9%; last -5.4%).
  • Swiss January Unemployment Rate remained at 2.7%, as expected.
• Commodities:
  • WTI Crude: +0.4% to $71.34/bbl
  • Gold: -0.1% to $2890.60/ozt
  • Copper: +0.7% to $4.474/lb
• Currencies:
  • EUR/USD: -0.4% to 1.0360
  • GBP/USD: -1.0% to 1.2370
  • USD/CNH: +0.2% to 7.2942
  • USD/JPY: -0.2% to 152.35
• Data out Today:
  • 8:30 ET: Preliminary Q4 Productivity (Briefing.com consensus 0.8%; prior 2.2%) and Unit Labor Costs (Briefing.com consensus 2.6%; prior 0.8%), weekly Initial Claims (Briefing.com consensus 213,000; prior 207,000), and Continuing Claims (prior 1.858 mln)
  • 10:30 ET: Weekly natural gas inventories (prior -321 bcf)