Bond Market Update

Inching Higher Ahead of PPI

• U.S. Treasuries are on track for a slightly higher start after yesterday's positive finish. The overnight session was fairly quiet, as Treasury futures began inching higher during the first half of the Asian session, continuing their advance into the night. Expectations for an imminent snap election in Japan remain in place while China reported a slightly smaller-than-expected trade surplus for December, though that was due to imports growing much faster than expected, which is an encouraging sign about internal demand. Export growth also exceeded estimates, though exports to the U.S. were down about 30% yr/yr. The U.S. session will feature November PPI (Briefing.com consensus 0.2%; prior 0.3%) and Core PPI (Briefing.com consensus 0.2%; prior 0.1%), which will be released alongside November Retail Sales (Briefing.com consensus 0.4%; prior 0.0%). Crude oil is on the rise while the U.S. Dollar Index is down 0.1% at 99.08.
• Yield Check:
  • 2-yr: -1 bp to 3.52%
  • 3-yr: -2 bps to 3.57%
  • 5-yr: -1 bp to 3.73%
  • 10-yr: -1 bp to 4.16%
  • 30-yr: -1 bp to 4.82%

• News:
  • Stock exchanges in Beijing and Shenzhen announced that margin ratios will be increased to 100% from 80%.
  • European Central Bank policymakers De Guindos and Kazaks said that policy is in a good place with respect to inflation.
  • The Bank of France expects domestic Q4 growth of just 0.2%. Bank of France Governor Villeroy de Galhau warned that France should not exceed a 5% deficit to GDP ratio in 2026.
  • China's December trade surplus reached $114.10 bln (expected surplus of $114.30 bln; last surplus of $111.68 bln). December imports were up 5.7% yr/yr (expected 0.9%; last 1.9%) and exports rose 6.6% yr/yr (expected 3.0%; last 5.9%).
  • Japan's January Reuters Tankan Index fell to 7 from 10 and December Machine Tool Orders rose 10.6% yr/yr (expected 14.2%; last 16.8%).
  • South Korea's December Import Price Index was up 0.3% yr/yr (last 1.9%) and Export Price Index was up 5.5% yr/yr (last 6.8%). December Unemployment Rate jumped to 4.0% from 2.7%.
  • India's December WPI Inflation was up 0.83% yr/yr (expected 0.30%; last -0.32%).
  • Australia's November Building Approvals increased 15.2% m/m, as expected (last -6.1%), rising 20.2% yr/yr, as expected (last -1.8%). November Private House Approvals were up 1.3% m/m, as expected (last -1.3%).
  • New Zealand's November Building Consents rose 2.8% m/m (last -0.7%).
• Commodities:
  • WTI Crude: +0.8% to $61.65/bbl
  • Gold: +1.0% to $4643.90/ozt
  • Copper: +0.9% to $6.07/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1648
  • GBP/USD: +0.2% to 1.3444
  • USD/CNH: +0.1% to 6.9729
  • USD/JPY: -0.3% to 158.61
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 28.5%; prior -9.7%) 
  • 8:30 ET: November PPI (Briefing.com consensus 0.2%; prior 0.3%), Core PPI (Briefing.com consensus 0.2%; prior 0.1%), November Retail Sales (Briefing.com consensus 0.4%; prior 0.0%), Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.4%), and Q3 Current Account Balance (prior -$251.3 bln)
  • 10:00 ET: December Existing Home Sales (Briefing.com consensus 4.15 mln; prior 4.13 mln)
  • 10:30 ET: Weekly crude oil inventories (prior -3.83 mln)