Bond Market Update

Shorter Tenors Trim Monday Gains

• U.S. Treasuries had a subdued showing on Tuesday, keeping yields near their closing levels from Monday with some slight relative weakness up front and relative strength in the 30-yr bond. Treasuries followed Monday's charge with a modestly lower start in shorter tenors after a night that was subdued for sovereign debt in general. Treasuries attempted a quick recovery of their starting losses, but the flat line offered resistance for most tenors while the long bond outperformed, spending the entire session just below its high from Monday. A new global tariff went into effect today, but at a rate of 10% instead of 15%, and today's economic data showed an improvement in Consumer Confidence for February (91.2; Briefing.com consensus 86.0; prior 89.0). The U.S. Treasury sold $69 bln in 2-yr notes, though the demand was a little soft. Crude oil slipped back below $66/bbl while the U.S. Dollar Index rose 0.2% to 97.85.
• Yield Check:
  • 2-yr: +2 bps to 3.46%
  • 3-yr: +1 bp to 3.46%
  • 5-yr: +2 bps to 3.60%
  • 10-yr: UNCH at 4.03%
  • 30-yr: -1 bp to 4.69%

• News:
  • The Atlanta Fed left its GDPNow forecast for Q1 GDP at 3.1% in the latest update.
  • FedEx (FDX) filed a federal lawsuit, seeking to recover all IEEPA tariffs that the company paid in recent months.
  • The People's Bank of China made no changes to its one-year (3.00%) and five-year (3.50%) loan prime rates, which was expected.
  • Japan's Prime Minister Takaichi reportedly expressed reservations about additional rate hikes during a meeting with Bank of Japan Governor Ueda.
  • China's Ministry of Commerce banned dual-use exports to nearly two dozen Japanese companies, citing national security concerns.
  • German Chancellor Merz will visit China over the next two days.
  • South Korea's February Consumer Confidence rose to 112.1 from 110.8. January PPI was up 0.6% m/m (last 0.4%), rising 1.9% yr/yr (last 1.9%).
  • U.K.'s February CBI Distributive Trades Survey fell to -43 from -17 (expected -27).
  • France's February Business Survey fell to 102 from 105 (expected 104).
• Today's Data: 
  • The Conference Board's Consumer Confidence Index increased to 91.2 in February (Briefing.com consensus: 86.0) from an upwardly revised 89.0 (from 84.5) in January. In the same period a year ago, the index stood at 100.1.
    • The key takeaway from the report is that the month-over-month improvement was driven by increased expectations, with all three components of the index—income, business, and labor market conditions—advancing from January.
  • The FHFA Housing Price Index was up 0.1% in December (Briefing.com consensus 0.4%) after increasing a revised 0.7% (from 0.6%) in November.
  • The S&P Case-Shiller Home Price Index was up 1.4% year-over-year in December (Briefing.com consensus 1.4%), unchanged from 1.4% in November.
  • Wholesale Inventories increased by 0.2% in December (Briefing.com consensus 0.2%) after a 0.2% increase in November.
  • $69 bln 2-year Treasury note auction results (prior 12-auction average):
    • High yield: 3.455% (3.741%).
    • Bid-to-cover: 2.63 (2.61).
    • Indirect bid: 55.9% (61.7%).
    • Direct bid: 34.3% (27.5%).
• Commodities:
  • WTI crude: -1.0% to $65.66/bbl
  • Gold: -1.0% to $5176.60/ozt
  • Copper: +2.6% to $5.93/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1776
  • GBP/USD: +0.1% to 1.3497
  • USD/CNH: -0.1% to 6.8794
  • USD/JPY: +0.8% to 155.80
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 2.8%)
  • 10:30 ET: Weekly crude oil inventories (prior -9.01 mln)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results