Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a slightly lower start after a quiet night in Treasury futures, which masked big gains in equity markets in Japan (+3.9%) and South Korea (+6.8%). Precious metals have also found their footing, reclaiming yesterday's losses, after increased CME margin requirements took effect yesterday evening. Overnight action saw a somewhat weak 10-yr JGB auction in Japan and a 25-basis point rate hike from the Reserve Bank of Australia, which was expected. However, the central bank also hinted at more hikes to come, which has the market thinking that two more hikes will be announced this year. In the U.S., the market was scheduled to receive the Job Openings and Labor Turnover survey for December (prior 7.146 mln) at 10:00 ET, but that release is being delayed by the government shutdown. The U.S. Treasury announced after yesterday's close that borrowing in Q1 will reach $574 bln, $3 bln lower than the previous estimate. Borrowing in Q2 is expected to reach $109 bln. The full quarterly refunding statement will be released tomorrow at 8:30 ET. Crude oil holds a modest gain while the U.S. Dollar Index is little changed at 97.62.
• Yield Check:
  • 2-yr: +1 bp to 3.58%
  • 3-yr: +1 bp to 3.65%
  • 5-yr: UNCH at 3.84%
  • 10-yr: +1 bp to 4.29%
  • 30-yr: +1 bp to 4.92%

• News:
  • Shanghai set its growth target for this year at 5.0%, down from 5.4% in 2025.
  • The European Central Bank's lending survey for Q4 revealed unexpected tightening in conditions that is now expected to continue into Q1.
  • Standard & Poor's affirmed UniCredit A- rating and upgraded its outlook to Positive from Stable.
  • The French budget for 2026 passed into law without a vote in parliament. Finance Minister Lescure said that the budget deficit will decrease to 5.0% from 5.4%.
  • Japan's January Monetary Base was down 9.5% yr/yr (expected -10.3%; last -9.8%).
  • South Korea's January CPI was up 0.4% m/m, as expected (last 0.3%), rising 2.0% yr/yr (expected 2.1%; last 2.3%).
  • Hong Kong's December Retail Sales rose 6.6% yr/yr (last 6.5%).
  • Australia's December Building Approvals fell 14.9% m/m (expected -6.2%; last 13.1%), rising 0.4% yr/yr (last 19.4%). December Private House Approvals rose 0.4% m/m (last 0.8%).
  • New Zealand's December Building Consents fell 4.6% m/m (last 2.7%).
  • France's January CPI was down 0.3% m/m (expected -0.1%; last 0.1%) but up 0.3% yr/yr (expected 0.6%; last 0.8%). December government budget deficit reached EUR124.7 bln (last deficit of EUR155.4 bln). 
  • Spain's January Unemployment increased by 30,400 (expected 13,400; last -16,300).
• Commodities:
  • WTI Crude: +0.5% to $62.45/bbl
  • Gold: +6.2% to $4938.90/ozt
  • Copper: +3.9% to $6.054/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1796
  • GBP/USD: +0.1% to 1.3681
  • USD/CNH: -0.1% to 6.9333
  • USD/JPY: +0.2% to 155.88
• No Data on Today's Schedule