Bond Market Update

Data Recon

• The January Trade Balance showed a large widening in the trade deficit to $131.4 billion (Briefing.com consensus -$93.5 billion) from an upwardly revised $98.1 billion (from -$98.4 billion) in December. January imports were $36.6 billion more than December imports while January exports were $3.3 billion more than December exports.
  • The key takeaway from the report is that efforts to get in front of expected tariff actions drove the huge increase in imports, which will be a drag on Q1 GDP forecasts.
• Weekly initial jobless claims for the week ending March 1 decreased by 21,000 to 221,000 (Briefing.com consensus 234,000). Continuing jobless claims for the week ending February 22 increased by 42,000 to 1.897 million.
  • The key takeaway from the report is that the reduced level of initial claims -- a leading indicator -- will temper concerns for the time being about the labor market showing more pronounced signs of weakening.
• Q4 productivity was upwardly revised to 1.5% (Briefing.com consensus 1.2%) from the advance estimate of 1.2%. Q4 unit labor costs were revised down to 2.2% (Briefing.com consensus 3.0%) from the advance estimate of 3.0%.
  • The key takeaway from the report is that both components had the right skew for market sentiment in that productivity was higher than previously reported while unit labor costs (an inflation gauge) were lower than previously reported, aided by the improved productivity.
• Yield Check:
  • 2-yr: -2 bps to 3.97%
  • 3-yr: UNCH at 3.99%
  • 5-yr: +1 bp to 4.07%
  • 10-yr: +3 bps to 4.29%
  • 30-yr: +3 bps to 4.59%