Bond Market Update

Lower Start Ahead

• U.S. Treasuries are on track for a modestly lower start after a quiet overnight session. Treasury futures spent the night in a sideways range, slipping to lows during the past hour. The selling has been accompanied by weakness in other sovereign debt, and it follows a night that saw just a handful of economic reports. Still, investors received some news headlines, including hints from Japan's Finance Minister Katayama about the potential for a joint intervention with the U.S. Treasury to boost the yen. In Europe, spreads between yields on Germany's 10-yr bund and corresponding instruments from Spain and Italy are at their tightest levels since 2008 thanks to improving fiscal situations in Spain and Italy combined with prolonged weakness in the German economy. Crude oil is reclaiming a portion of its loss from yesterday while the U.S. Dollar Index is down 0.1% at 99.24.
• Yield Check:
  • 2-yr: +2 bps to 3.58%
  • 3-yr: +1 bp to 3.63%
  • 5-yr: +2 bps to 3.78%
  • 10-yr: +3 bps to 4.19%
  • 30-yr: +3 bps to 4.82%

• News:
  • The U.S. Treasury reported last evening that Net Long-Term TIC transactions totaled $220.2 bln in November, up from $30.9 bln in October.
  • The Bank of Japan is not expected to announce a rate hike next week, but expectations for a rate increase in April are on the rise.
  • NTT and Honda priced upcoming bonds while Credit Agricole priced its Samurai bonds.
  • Japan's CDP and Komeito parties have established an alliance aimed at blocking Prime Minister Takaichi's LDP from gaining outright majority in the Lower House.
  • The U.S. reached an agreement with Taiwan on a quota system for chip tariffs.
  • South Korea's Finance Minister Koo said that planned investment in the U.S. will have to be delayed past the first half of this year due to unfavorable exchange rates.
  • Singapore's December trade surplus reached SGD2.205 bln (last surplus of SGD6.777 bln) as non-oil exports fell 9.4% m/m (expected -4.5%; last 7.1%), rising 6.1% yr/yr (expected 10.0%; last 11.5%).
  • New Zealand's December Business PMI hit 56.1 (last 51.4). December FPI was down 0.3% m/m (last -0.4%).
  • Germany's final December CPI was unchanged m/m, as expected (last -0.2%), rising 1.8% yr/yr, as expected (last 2.3%).
  • Italy's December CPI was up 0.2% m/m, as expected (last -0.2%), rising 1.2% yr/yr, as expected (last 1.1%).
• Commodities:
  • WTI Crude: +1.4% to $60.04/bbl
  • Gold: -0.4% to $4607.80/ozt
  • Copper: -1.7% to $5.891/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1614
  • GBP/USD: +0.2% to 1.3394
  • USD/CNH: +0.1% to 6.9664
  • USD/JPY: -0.2% to 158.20
• Data out Today:
  • 9:15 ET: December Industrial Production (Briefing.com consensus 0.2%; prior 0.2%) and Capacity Utilization (Briefing.com consensus 76.0%; prior 76.0%)
  • 10:00 ET: January NAHB Housing Market Index (Briefing.com consensus 40; prior 39)