Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a slightly lower start after a quiet night in the futures market. Treasury futures inched down in early evening trade, reaching lows around the start of the Asian session. The market climbed off lows once the focus shifted to Europe, but the bounce has been limited. President Trump said last evening that the tariff on imports from South Korea will be increased to 25% from 15% because South Korean legislature has not passed the trade agreement that was made with the U.S. However, South Korea's parliament is still expected to ratify the deal by the end of February, so the increase should only be temporary. Precious metals have had a volatile night after reaching fresh record highs yesterday while crude oil holds a slim loss near $60.50/bbl. The U.S. Dollar Index is down 0.3% at 96.73.
• Yield Check:
  • 2-yr: UNCH at 3.59%
  • 3-yr: +1 bp to 3.66%
  • 5-yr: +1 bp to 3.83%
  • 10-yr: +2 bps to 4.23%
  • 30-yr: +1 bp to 4.82%

• News:
  • China's Ministry of Commerce said that it will create conditions for attracting foreign investment.
  • China warned its citizens against traveling to Japan for Lunar New Year, claiming "severe" safety threats.
  • The EU signed a trade deal with India.
  • Germany's economy minister said that he expects some debt-fueled growth this year but does not expect it to be sustainable.
  • European Central Bank policymaker Kocher said that "a lot" has happened since the last ECB meeting and that the ability to act quickly and decisively is important. This comes after multiple ECB policymakers said that policy is in a good place in recent weeks.
  • China's December Industrial Profit was up 0.6% YTD (last 0.1%).
  • Japan's December Corporate Services Price Index was up 2.6% yr/yr (expected 2.7%; last 2.7%). November BoJ Core CPI was up 1.9% (expected 2.0%; last 2.2%).
  • South Korea's January Consumer Confidence rose to 73.0 from 70.0.
  • Hong Kong's December trade deficit reached $63.3 bln (last deficit of $48.5 bln) as imports grew 30.6% m/m (last 18.1%) and exports rose 26.1% m/m (last 18.8%).
  • Australia's December NAB Business Survey rose to 9 from 7 and Business Confidence rose to 3 from 2.
  • New Zealand's December Credit Card Spending was down 0.3% yr/yr (last 4.4%).
  • France's January Consumer Confidence remained at 90, as expected.
  • Spain's Q4 Unemployment Rate fell to 9.93% from 10.45% (expected 10.20%).
• Commodities:
  • WTI Crude: -0.2% to $60.50/bbl
  • Gold: UNCH at $5084.70/ozt
  • Copper: -2.2% to $5.884/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1925
  • GBP/USD: +0.5% to 1.3737
  • USD/CNH: UNCH at 6.9488
  • USD/JPY: -0.5% to 153.30
• Data out Today:
  • 9:00 ET: November FHFA Housing Price Index (Briefing.com consensus 0.3%; prior 0.4%) and November S&P Case-Shiller Home Price Index (Briefing.com consensus 1.2%; prior 1.3%)
  • 10:00 ET: January Consumer Confidence (Briefing.com consensus 90.0; prior 89.1)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results