Bond Market Update

Long End Faces Additional Pressure

• U.S. Treasuries are on track for a mixed start with longer tenors expected to show a continuation of their selling from the past two days. Treasury futures retreated overnight alongside other sovereign debt. The weakness has been widespread, with Japan's 10-yr yield rising six basis points to 1.49%, which prompted speculation about a potential emergency bond buying operation from the Bank of Japan. German debt has also faced additional pressure after yesterday's plunge. With today's seven-basis point increase to 2.86%, Germany's 10-yr bund yield is just 16 basis points below its high from 2023. The European Central Bank is expected to announce a 25-basis point rate cut at 8:15 ET and signal additional easing in the coming months. Treasuries saw some recent strength with the short end rallying to highs after the Challenger Job Cuts report for February (172,017; prior 49,795) showed the highest number of cuts since 2020. Government job cuts accounted for nearly half of the total. Crude oil is climbing of a fresh low for the year while the U.S. Dollar Index is down 0.2% at 104.10, widening this week's loss to 3.2%.
• Yield Check:
  • 2-yr: -5 bps to 3.94%
  • 3-yr: -3 bps to 3.96%
  • 5-yr: -1 bp to 4.05%
  • 10-yr: +2 bps to 4.29%
  • 30-yr: +4 bps to 4.60%

• News:
  • China Securities Times speculated that property rules in Shanghai and Beijing could be relaxed.
  • The Bank of England's Decision Maker Panel survey for January showed no change in one-year (3.1%) and three-year (2.8%) CPI expectations.
  • European air carriers Lufthansa, Air France, and KLM reported strong quarterly results.
  • South Korea's February CPI was up 0.3% m/m (expected 0.2%; last 0.7%), rising 2.0% yr/yr (expected 2.0%; last 2.2%).
  • Australia's January Building Approvals rose 6.3% m/m (expected -0.1%; last 1.7%), increasing 9.1% yr/yr (expected 5.6%; last 10.1%). Private House Approvals were up 1.1% m/m (last -2.8%). January trade surplus reached AUD5.62 bln (expected surplus of AUD5.85 bln; last surplus of AUD4.92 bln) as imports dipped 0.3% m/m (last 5.9%) and exports rose 1.3% m/m (last 1.2%).
  • Eurozone's January Retail Sales were down 0.3% m/m (expected 0.1%; last 0.0%) but up 1.5% yr/yr (expected 1.9%; last 2.2%). February Construction PMI hit 42.7 (expected 45.4; last 45.4).
  • Germany's February Construction PMI hit 41.2 (last 42.5). 
  • U.K.'s February Construction PMI hit 44.6 (expected 49.5; last 48.1).
  • France's February Construction PMI hit 39.8 (last 44.5).
  • Italy's February Construction PMI hit 48.2 (last 50.9).
  • Swiss February Unemployment Rate remained at 2.7%, as expected.
• Commodities:
  • WTI Crude: +0.7% to $66.77/bbl
  • Gold: -0.6% to $2910.10/ozt
  • Copper: -0.4% to $4.774/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0798
  • GBP/USD: UNCH at 1.2888 
  • USD/CNH: +0.2% to 7.2476
  • USD/JPY: -0.8% to 147.60
• Data out Today:
  • 8:30 ET: January Trade Balance (Briefing.com consensus -$93.5 bln; prior -$98.4 bln), Revised Q4 Productivity (Briefing.com consensus 1.2%; prior 1.2%), Revised Q4 Unit Labor Costs (Briefing.com consensus 3.0%; prior 3.0%), weekly Initial Claims (Briefing.com consensus 234,000; prior 242,000), and Continuing Claims (prior 1.862 mln)
  • 10:00 ET: January Wholesale Inventories (Briefing.com consensus 0.7%; prior -0.5%)
  • 10:30 ET: Weekly natural gas inventories (prior -261 bcf)