Bond Market Update

Longer Tenors Stay at Q1 Highs

• U.S. Treasuries climbed on Thursday, sending yields on 10s and 30s to their lowest closing levels of the year while shorter tenors also recorded solid gains, though their yields remained a bit above 2026 lows. The trading day started in quiet fashion after a night that featured falling expectations for an April rate hike from the Bank of Japan and a data slate that was free of big surprises. Treasuries held their ground through the morning release of a jobless claims report (212,000; Briefing.com consensus 211,000), which was a bit worse than expected, climbing to highs alongside a weak open on Wall Street that was owed to renewed volatility in the technology sector. Treasuries reached their best levels around 10:00 ET, staying just below their highs into the close. The U.S. Treasury completed this week's note auction slate with a solid sale of $44 bln in 7-yr notes. Crude oil ended the day little changed after swinging inside a big range amid ongoing uncertainty related to Iran. Diplomats from the U.S. and Iran met in Geneva today and their meeting was deemed constructive, but there were no other details. The U.S. Dollar Index rose 0.1% to 97.79, staying near its 50-day moving average (97.92).
• Yield Check:
  • 2-yr: -2 bps to 3.45%
  • 3-yr: -3 bps to 3.46%
  • 5-yr: -4 bps to 3.58%
  • 10-yr: -3 bps to 4.02%
  • 30-yr: -3 bps to 4.67%

• News:
  • The Bank of Korea left its policy rate at 2.50%, as expected. Governor Rhee said that South Korea's inclusion in the MSCI Developed Market Index could boost inflows of foreign capital.
  • The U.K. reached a critical minerals deal with Kazakhstan.
  • Iceland will hold a referendum on resuming EU accession talks.
  • Japan's December Leading Index rose to 111.0 from 109.9 (expected 110.2) and Coincident Indicator was down 0.6% m/m (expected -0.4%; last -1.0%).
  • Singapore's Q4 GDP expanded 2.1% qtr/qtr (expected 1.9%; last 2.6%). January Industrial Production was up 5.3% m/m (expected 4.5%; last -0.3%), rising 16.6% yr/yr (expected 11.0%; last 10.9%).
  • Australia's Q4 Building Capital Expenditure increased by 2.3% (last 2.3%) and Private New Capital Expenditure was up 0.4% qtr/qtr (expected -0.1%; last 6.4%).
  • New Zealand's February ANZ Business Confidence fell to 59.2 from 64.1.
  • Eurozone's February Business and Consumer Survey fell to 98.3 from 99.3 (expected 99.8). January Private Sector Loans rose 3.0% yr/yr (expected 3.1%; last 3.0%) and January loans to nonfinancials rose 2.8% yr/yr (expected 3.1%; last 3.0%).
  • Italy's February Consumer Confidence rose to 97.4 from 96.8 (expected 97.2) and Business Confidence fell to 88.5 from 89.2.
  • Swiss Q4 Employment Level increased to 5.544 mln from 5.532 mln.
• Today's Data:
  • Initial jobless claims for the week ending February 21 increased by 4,000 to 212,000 (Briefing.com consensus: 211,000). Continuing jobless claims for the week ending February 14 decreased by 31,000 to 1.833 million.
    • The key takeaway from the report is its persistent low-firing, low-hiring messaging.
  • Weekly natural gas inventories decreased by 52 bcf after decreasing by 144 bcf a week ago.
  • $44 bln 7-year Treasury note auction results (prior 12-auction average):
    • High yield: 3.790% (4.021%).
    • Bid-to-cover: 2.50 (2.54).
    • Indirect bid: 63.6% (64.4%).
    • Direct bid: 26.0% (25.2%).
• Commodities:
  • WTI crude: -0.4% to $65.21/bbl
  • Gold: -0.6% to $5194.10/ozt
  • Copper: -0.5% to $6.01/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1798
  • GBP/USD: -0.5% to 1.3488
  • USD/CNH: -0.1% to 6.8422 
  • USD/JPY: -0.2% to 156.10
• The Day Ahead:
  • 8:30 ET: January PPI (Briefing.com consensus 0.3%; prior 0.5%) and Core PPI (Briefing.com consensus 0.3%; prior 0.6%)
  • 9:45 ET: February Chicago PMI (Briefing.com consensus 52.5; prior 54.0)
  • 10:00 ET: November Construction Spending (Briefing.com consensus 0.3%: prior 0.5%)