Bond Market Update

Wobbly Stocks Bolster Thursday Advance

• U.S. Treasuries finished Thursday with gains across the curve, sending yields on 5s and 10s back below their respective 200-day moving averages. The trading day started in quiet fashion with some relative weakness in longer tenors. The market slipped to lows during the initial hour of trade after investors received a jobless claims report (209,000; Briefing.com consensus 205,000) that was a touch worse than expected, a productivity report for Q3 that was left unrevised, and a widening in the trade deficit for November (-$58.3 bln; Briefing.com consensus -$43.5 bln; prior -$29.2 bln). The early pullback lifted yields on longer tenors back to yesterday's session highs, but the entire complex bounced as equities stumbled out of the gate. The next hour saw a steady push to highs, followed a brief midday dip that eventually gave way to a return to the day's best levels despite a soft $44 bln 7-yr note auction. Commodities had a volatile session, with gold bouncing inside a $200/ozt range, while crude oil touched its best level since early August, settling not far below that mark. The U.S. Dollar Index slipped 0.2% to 96.28.
• Yield Check:
  • 2-yr: -3 bps to 3.55%
  • 3-yr: -3 bps to 3.62%
  • 5-yr: -4 bps to 3.81%
  • 10-yr: -2 bps to 4.23%
  • 30-yr: -1 bp to 4.85%

• News:
  • President Trump said that he will announce his Fed Chairman nominee sometime next week.
  • The Senate failed to pass a funding bill today, so the potential remains for another government shutdown on Friday at midnight.
  • Iran is planning joint exercises with China and Russia in the Sea of Oman and the Indian Ocean.
  • South Korea's industry minister is visiting Washington amid the delay in implementing the trade deal with the U.S.
  • Hong Kong Monetary Authority made no changes to its policy, following the Fed's lead.
  • The Monetary Authority of Singapore concluded its latest meeting with no policy changes.
  • Sweden's Riksbank held its policy rate at 1.75%, as expected.
  • Japan's January Household Confidence rose to 37.9 from 37.2 (expected 37.1).
  • Singapore's Q4 Unemployment Rate remained at 2.0%.
  • Australia's Q4 Import Price Index was up 0.9% qtr/qtr (expected -0.2%; last -0.4%) and Export Price Index was up 3.2% qtr/qtr (last -0.9%).
  • New Zealand's December trade surplus reached NZD52 mln (expected surplus of NZD30 mln; last deficit of NZD355 mln). January ANZ Business Confidence fell to 64.1 from 73.6. January NBNZ Own Activity decreased to 51.6% from 60.9%.
  • Eurozone's January Business and Consumer Survey rose to 99.4 from 97.2 (expected 97.0). December Private Sector Loans were up 3.0% yr/yr (expected 2.9%; last 2.9%) and loans to nonfinancials were also up 3.0% yr/yr (last 3.1%).
  • France's December jobseeker total fell to 3.117 mln from 3.129 mln.
  • Italy's non-EU trade surplus reached EUR8.39 bln (last surplus of EUR7.04 bln). November Industrial Sales dipped 0.1% m/m (last -0.6%), showing no change yr/yr (last 1.7%).
  • Spain's December Retail Sales rose 2.9% yr/yr (last 6.0%). January Business Confidence ticked up to -3.0 from -3.4.
  • Swiss December trade surplus reached CHF1.036 bln (expected surplus of CHF4.85 bln; last surplus of CHF3.841 bln).
• Today's Data:
  • Initial jobless claims for the week ending January 24 decreased by 1,000 to 209,000 (Briefing.com consensus: 205,000), while continuing jobless claims for the week ending January 17 decreased by 38,000 to 1.827 million, which is the lowest level since September 21, 2024.
    • The key takeaway from the report is that it corroborates the idea that labor market conditions are still reasonably good to promote solid consumer spending activity that will be supportive of ongoing economic growth and a Fed that can show more patience before cutting rates again.
  • The revised Q3 productivity report didn't contain any new surprises or changes. The growth rate for Q3 productivity remained at an impressive 4.9% (Briefing.com consensus: 4.9%), while unit labor costs decreased 1.9% (Briefing.com consensus: -1.9%), unchanged from the advance report.
    • With no changes, the key takeaway remained the same: this productivity report is the golden ticket for the economy (and the Fed, per chance), as it reflects strong growth without labor cost inflation.
  • There was a change in the trade deficit. It widened to $56.8 billion in November (Briefing.com consensus: -$43.5 billion) from an upwardly revised $29.2 billion (from -$29.4 billion) in October. Exports were $10.9 billion less than October exports, and imports were $16.8 billion more than October imports.
    • The key takeaway from the report is that it will create a drag on Q4 GDP growth expectations. A possible silver lining, though, is that the import activity could be construed as a reflection of increased demand in the U.S.
  • Factory orders jumped 2.7% month-over-month in November (Briefing.com consensus: 0.5%) following an upwardly revised 1.2% decline (from -1.3%) in October. Excluding transportation, factory orders increased 0.2% after declining 0.1% in October. Shipments of manufactured goods slipped 0.1% after increasing 0.1% in October.
    • The key takeaway from the report is that transportation equipment orders, which are volatile, drove the increase in total factory orders.
  • Wholesale Inventories were up 0.2% month-over-month (Briefing.com consensus 0.1%) in November after increasing a revised 0.2% (from 0.5%) in October.
  • Weekly natural gas inventories decreased by 242 bcf after decreasing by 120 bcf a week ago.
  • $44 bln 7-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.018% (4.058%).
    • Bid-to-cover: 2.45 (2.56).
    • Indirect bid: 66.9% (64.4%).
    • Direct bid: 22.2% (25.2%).
• Commodities:
  • WTI crude: +3.5% to $65.38/bbl
  • Gold: +1.1% to $5359.90/ozt
  • Copper: +4.9% to $6.21/lb
• Currencies:
  • EUR/USD: UNCH at 1.1949
  • GBP/USD: -0.1% to 1.3791
  • USD/CNH: +0.1% to 6.9493
  • USD/JPY: -0.1% to 153.18
• The Day Ahead:
  • 8:30 ET: December PPI (Briefing.com consensus 0.2%; prior 0.2%) and Core PPI (Briefing.com consensus 0.3%; prior 0.0%)
  • 9:45 ET: January Chicago PMI (Briefing.com consensus 43.0; prior 43.5)