Bond Market Update

Long End Set to Continue Thursday Strength

• U.S. Treasuries are on track for a higher start with the long end expected to show early leadership after outperforming yesterday. Treasury futures began inching higher in early evening trade, continuing their advance through the night. The rally met some resistance at the start of the European session, but Treasury futures hit fresh highs during the past hour. Overnight action featured the release of the latest policy Statement from the Bank of Japan, but the central bank opted to leave its rate at 0.75% with one policymaker voting in favor of a hike. Japan's Manufacturing PMI (51.5) returned to expansion in the flash reading for January while flash January Manufacturing PMI readings from Europe beat expectations, though the eurozone-wide reading (49.4) remained in contraction. The U.S. session will also bring the release of flash S&P Global U.S. Manufacturing PMI (prior 51.8) and flash S&P Global U.S. Services PMI (prior 52.5) for January at 9:45 ET, followed by the final reading of the University of Michigan Consumer Sentiment for January (Briefing.com consensus 54.0; prior 54.0). Crude oil is on the rise while the U.S. Dollar Index is down 0.1% at 98.30.
• Yield Check:
  • 2-yr: -1 bp to 3.60%
  • 3-yr: -1 bp to 3.67%
  • 5-yr: -1 bp to 3.84%
  • 10-yr: -2 bps to 4.23%
  • 30-yr: -3 bps to 4.82%

• News:
  • President Trump said that he has finished interviewing candidates for the upcoming Fed Chairman nomination.
  • Japan's Lower House was dissolved ahead of a snap election on February 8.
  • Malaysia's central bank left its policy rate at 2.75%, as expected.
  • Bank of England policymaker Greene said that there is a case to be made for moving the bank rate in the opposite direction from the fed funds rate since looser Fed policy would increase British inflation.
  • Japan's December National CPI was down 0.1% m/m (last 0.3%) but up 2.1% yr/yr (last 2.9%). National Core CPI was up 2.4% yr/yr, as expected (last 3.0%). Flash January Manufacturing PMI hit 51.5 (expected 50.1; last 50.0) and flash Services PMI hit 53.4 (last 51.6).
  • South Korea's January Consumer Confidence rose to 110.8 from 109.9.
  • Singapore's December CPI was up 0.3% m/m (last 0.2%), rising 1.2% yr/yr, as expected (last 1.2%). December Core CPI was up 1.2% yr/yr (last 1.2%). Q4 URA Property Index increased 0.6% qtr/qtr (expected 0.7%; last 0.9%).
  • India's flash January Manufacturing PMI hit 56.8 (last 55.0) and flash Services PMI hit 59.3 (last 58.0).
  • Australia's flash January Manufacturing PMI hit 52.4 (last 51.6) and flash Services PMI hit 56.0 (last 51.1).
  • New Zealand's Q4 CPI was up 0.6% qtr/qtr (expected 0.5%; last 1.0%), rising 3.1% yr/yr (expected 3.0%; last 3.0%).
  • Eurozone's flash January Manufacturing PMI hit 49.4 (expected 49.1; last 48.8) and flash Services PMI hit 51.9 (expected 52.6; last 52.4).
  • Germany's flash January Manufacturing PMI hit 48.7 (expected 47.8; last 47.0) and flash Services PMI hit 53.3 (expected 52.6; last 52.7).
  • U.K.'s December Retail Sales rose 0.4% m/m (expected 0.0%; last -0.1%), increasing 2.5% yr/yr (expected 1.0%; last 1.8%). December Core Retail Sales were up 0.3% m/m (expected -0.2%; last -0.4%), rising 3.1% yr/yr (expected 1.4%; last 2.6%). Flash January Manufacturing PMI hit 51.6 (expected 50.6; last 50.6) and flash Services PMI hit 54.3 (expected 51.7; last 51.4).
  • France's flash January Manufacturing PMI hit 51.0 (expected 50.4; last 50.7) and flash Services PMI hit 47.9 (expected 50.3; last 50.1).
• Commodities:
  • WTI Crude: +1.8% to $60.44/bbl
  • Gold: +0.5% to $4939.10/ozt
  • Copper: +2.4% to $5.919/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1742
  • GBP/USD: +0.2% to 1.3527
  • USD/CNH: UNCH at 6.9603
  • USD/JPY: -0.1% to 158.17
• Data out Today:
  • 9:45 ET: Flash January S&P Global U.S. Manufacturing PMI (prior 51.8) and flash January S&P Global U.S. Services PMI (prior 52.5)
  • 10:00 ET: Final January University of Michigan Consumer Sentiment (Briefing.com consensus 54.0; prior 54.0)