Bond Market Update

Pulling Back

• U.S. Treasuries are on track for a modestly lower start after two days of gains in all tenors. Treasury futures began inching lower in early evening action with pressure intensifying as the night went on. That said, the overall movement has been limited while other sovereign debt is little changed despite a barrage of data from Asia and Europe. China's total social financing exceeded December expectations while the U.K. reported strong growth for November with some analysts speculating that the modest momentum could have carried into the start of 2026. The U.S. session will see the release of a few reports at 8:30 ET, though market impact is likely to be limited. Crude oil has reversed from its highest level since late October while the U.S. Dollar Index is up 0.1% at 99.18.
• Yield Check:
  • 2-yr: +2 bps to 3.53%
  • 3-yr: +2 bps to 3.58%
  • 5-yr: +1 bp to 3.73%
  • 10-yr: UNCH at 4.14%
  • 30-yr: -1 bp to 4.79%

• News:
  • U.S. Treasury Secretary Bessent said that recent weakness in the Japanese yen and the Korean won do not match the fundamental standing of the two economies.
  • Goldman Sachs (GS) and Morgan Stanley (MS) beat Q4 EPS expectations with Goldman raising its dividend.
  • Shipper Matson said that cargo flow from China saw higher than expected rates and volume.
  • The Bank of Korea left its policy rate at 2.50%, as expected.
  • The People's Bank of China lowered its structural policy tool rates and relending rates by 25 basis points.
  • There was some speculation that South Korea may not be able to reach its annual $20 bln investment target in the U.S.
  • China's December New Loans reached CNY910.0 bln (expected CNY820.0 bln; last CNY390.0 bln). December Outstanding Loans grew 6.4% yr/yr (expected 6.3%; last 6.4%) and total social financing reached CNY2.21 trln (expected CNY2.00 trln; last CNY2.49 trln).
  • Japan's December PPI was up 0.1% m/m, as expected (last 0.3%), rising 2.4% yr/yr, as expected (last 2.7%).
  • South Korea's December trade surplus reached $12.17 bln (expected surplus of $12.18 bln; last surplus of $9.74 bln) as imports grew 4.6% yr/yr, as expected (last 1.1%), and exports rose 13.3% yr/yr (expected 13.4%; last 8.4%).
  • India's December trade deficit reached $25.04 bln (last deficit of $24.53 bln).
  • Australia's MI Inflation Expectations slowed to 4.6% from 4.7%.
  • Eurozone's November trade surplus reached EUR9.9 bln (expected surplus of EUR14.8 bln; last surplus of EUR17.9 bln). November Industrial Production was up 0.7% m/m (expected 0.5%; last 0.7%), rising 2.5% yr/yr (expected 2.0%; last 1.7%).
  • Germany's December WPI was down 0.2% m/m (expected 0.2%; last 0.3%) but up 1.2% yr/yr (last 1.5%).
  • U.K.'s November GDP expanded 0.3% m/m (expected 0.1%; last -0.1%), growing 1.4% yr/yr (expected 1.1%; last 1.1%). November Manufacturing Production was up 2.1% m/m (expected 0.4%; last 0.4%), rising 2.1% yr/yr (expected -0.3%; last -0.2%), November Industrial Production was up 1.1% m/m (expected 0.2%; last 1.3%), rising 2.3% yr/yr (expected -0.4%; last 0.4%), November Construction Output was down 1.3% m/m (expected -0.3%; last -1.2%), falling 1.1% yr/yr (expected 0.1%; last 0.9%).
  • France's December CPI ticked up 0.1% m/m, as expected (last 0.1%), rising 0.8% yr/yr, as expected (last 0.9%).
  • Italy's November Industrial Production was up 1.5% m/m (expected 0.6%; last -1.0%), rising 1.4% yr/yr (expected -0.6%; last -0.2%). November trade surplus reached EUR5.078 bln (expected surplus of EUR5.220 bln; last surplus of EUR4.183 bln).
  • Spain's December CPI was up 0.3% m/m, as expected (last 0.0%), rising 2.9% yr/yr, as expected (last 3.0%).
• Commodities:
  • WTI Crude: -4.0% to $59.53/bbl
  • Gold: -0.3% to $4621.50/ozt
  • Copper: -0.6% to $6.018/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1628
  • GBP/USD: -0.2% to 1.3408
  • USD/CNH: UNCH at 6.9636
  • USD/JPY: +0.1% to 158.58
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 210,000; prior 208,000), Continuing Claims (prior 1.914 mln), January Philadelphia Fed survey (Briefing.com consensus -5.0; prior -10.2), January Empire State Manufacturing survey (Briefing.com consensus 1.0; prior -3.9), and November Import/Export prices
  • 10:30 ET: Weekly natural gas inventories (prior -119 bcf)
  • 16:00 ET: November Net Long-Term TIC Flows (prior $17.5 bln)