Bond Market Update

Short End Leads

• U.S. Treasuries are on track for a modestly higher start with the long bond expected to begin closer to its unchanged level. Treasury futures spent the first half of the overnight session in an upward push, but their overnight advance met resistance shortly after the focus turned to action in Europe. The overnight session saw a rebound in Japanese debt following Tuesday's plunge in longer tenors, though the short end lagged, leaving the 2-yr bond with a slim loss. Japan's Finance Minister Katayama expressed confidence that the bond market will improve and that fiscal sustainability will be maintained. Elsewhere, President Trump is scheduled to begin his address to the World Economic Forum in Davos at 8:30 ET. The market will receive a few housing-related reports today and the U.S. Treasury will hold a $13 bln 20-yr bond reopening at 13:00 ET. Crude oil is little changed while the U.S. Dollar Index is down 0.2% at 98.47.
• Yield Check:
  • 2-yr: -3 bps to 3.57%
  • 3-yr: -3 bps to 3.65%
  • 5-yr: -2 bps to 3.84%
  • 10-yr: -2 bps to 4.28%
  • 30-yr: -1 bp to 4.91%

• News:
  • South Korea's exports were up 14.9% yr/yr through the first 20 days of January with chip exports jumping 70.2%.
  • China Securities Journal speculated that the People's Bank of China will delay its next easing move.
  • European Central Bank President Lagarde said that central bank will not always backstop fiscal spending if additional debt does not sustain growth.
  • The German government is reportedly lowering its domestic 2026 growth forecast to 1.0% from 1.3%.
  • Australia's December MI Leading Index was up 0.1% m/m (last 0.0%).
  • New Zealand's December RBNZ Offshore Holdings dipped to 57.5% from 58.0%.
  • U.K.'s December CPI was up 0.4% m/m, as expected (last -0.2%), rising 3.4% yr/yr (expected 3.3%; last 3.2%). Core CPI was up 0.3% m/m, as expected (last -0.2%), rising 3.2% yr/yr (expected 3.3%; last 3.2%). Input PPI was down 0.2% m/m (expected -0.1%; last 0.5%) and Output PPI was unchanged m/m (expected 0.1%; last 0.1%). December House Price Index was up 2.5% yr/yr (expected 1.8%; last 1.7%) and January CBI Industrial Trends Orders rose to -30 from -32 (expected -33).
• Commodities:
  • WTI Crude: UNCH at $60.37/bbl
  • Gold: +2.0% to $4861.40/ozt
  • Copper: +0.6% to $5.844/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1734
  • GBP/USD: -0.1% to 1.3424
  • USD/CNH: UNCH at 6.9559
  • USD/JPY: -0.2% to 157.81
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 14.1%; prior 28.5%)
  • 8:30 ET: December Housing Starts (prior NA) and Building Permits (prior NA)
  • 10:00 ET: September Construction Spending (Briefing.com consensus 0.0%; prior 0.2%), October Construction Spending (Briefing.com consensus 0.2%; prior NA), and December Pending Home Sales (Briefing.com consensus 0.7%; prior 3.3%)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results