Bond Market Update

 Steady Start Looms

• U.S. Treasuries are on track for a slightly higher start after a quiet upward drift during overnight trade in the futures market. The slight upward bias persisted through the night while other sovereign debt was largely little changed. Australia's debt underperformed amid expectations for accelerating inflation while longer-dated JGBs outperformed, sending yields on 20-, 30-, and 40-yr bonds to levels seen in early January. The overnight data flow was on the light side, but it is worth noting that the U.K.'s GDP report for Q4 (0.1%; expected 0.2%) was a touch light relative to expectations due to weak industrial production in December (-0.9%; expected -0.1%). The U.S. session will see the release of the latest jobless claims report and the U.S. Treasury will sell $25 bln in 30-yr bonds this afternoon. Crude oil holds a slim loss while the U.S. Dollar Index is up 0.1% at 96.92.
• Yield Check:
  • 2-yr: -1 bp to 3.50%
  • 3-yr: -1 bp to 3.56%
  • 5-yr: -2 bps to 3.72%
  • 10-yr: -1 bp to 4.16%
  • 30-yr: -2 bps to 4.79%

• News:
  • There was growing speculation that the Bank of Korea will launch a quantitative easing program.
  • Reserve Bank of Australia Governor Bullock defended the RBA's recent rate hike in a parliamentary testimony.
  • French President Macron urged EU leaders to come up with a plan to improve competitiveness by the summer.
  • Japan's January PPI was up 0.2% m/m, as expected (last 0.1%), rising 2.3% yr/yr, as expected (last 2.4%).
  • India's January CPI was up 2.75% (expected 2.40%; last 1.33%).
  • Australia's February MI Inflation Gauge accelerated to 5.0% from 4.6%.
  • U.K.'s Q4 GDP expanded 0.1% qtr/qtr (expected 0.2%; last 0.1%), growing 1.0% yr/yr (expected 1.2%; last 1.2%). December Industrial Production was down 0.9% m/m (expected -0.1%; last 1.3%) but up 0.5% yr/yr (expected 1.5%; last 2.3%). December Manufacturing Production was down 0.5% m/m (expected -0.2%; last 1.9%) but up 0.5% yr/yr (expected 1.8%; last 1.3%). December Construction Output was down 0.5% m/m (expected 0.5%; last -0.8%), falling 0.3% yr/yr (expected 0.0%; last -0.3%). Q4 Business Investment decreased 2.7% qtr/qtr (expected 0.4%; last 1.6%) but was up 2.0% yr/yr (last 2.5%). December trade deficit reached GBP22.72 bln (expected deficit of GBP22.30 bln; last deficit of GBP23.58 bln).
• Commodities:
  • WTI Crude: -0.4% to $64.40/bbl
  • Gold: -0.5% to $5075.90/ozt 
  • Copper: +0.2% to $5.978/lb
• Currencies:
  • EUR/USD: UNCH at 1.1872
  • GBP/USD: UNCH at 1.3629
  • USD/CNH: -0.1% to 6.8983
  • USD/JPY: +0.3% to 153.68
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 230,000; prior 231,000), and Continuing Claims (prior 1.844 mln)
  • 10:00 ET: January Existing Home Sales (Briefing.com consensus 4.21 mln; prior 4.35 mln)
  • 10:30 ET: Weekly natural gas inventories (prior -360 bcf)
• Treasury Auctions:
  • 13:00 ET: $25 bln 30-yr Treasury bond auction results