Bond Market Update

2-Yr Yield Hits Four-Week Low

• U.S. Treasuries followed their two days of quiet sideways trade with a Thursday rally that took place alongside continued weakness in tech stocks. The market started the day with relative strength in shorter tenors, but the entire complex advanced strongly as tech stocks remained weak with other areas of the stock market also succumbing to the pressure. Investors received three labor market-related reports today, and all three disappointed. Weekly initial claims jumped by 22,000, though the total rose from a low base of just 209,000. However, there were other signs of stress on the labor market, as job openings fell by 386,000 in December to 6.542 million, a low not seen since late 2020, while January job cuts tracked by Challenger, Gray & Christmas were up 117.8% year-over-year. Treasuries hit highs about an hour after the release of the JOLTs report, remaining at their best levels into the afternoon. Today's bid sent the 10-yr yield past its 200-day moving average (4.230%) to its lowest settlement in three weeks while the 5-yr yield also fell past the 200-day moving average of its own (3.802%), stopping just above its 50-day moving average (3.735%). Up front, the 2-yr yield slid past its 50-day moving average (3.530%) to a four-week low. Crude oil gave back yesterday's gain, stopping a bit above its 200-day moving average (62.33), while the U.S. Dollar Index rose 0.2% to 97.81.
• Yield Check:
  • 2-yr: -7 bps to 3.49%
  • 3-yr: -8 bps to 3.56%
  • 5-yr: -8 bps to 3.75%
  • 10-yr: -7 bps to 4.21%
  • 30-yr: -5 bps to 4.86%

• News:
  • Japan's Prime Minister Takaichi will visit the White House on March 19.
  • There was some speculation that Japan's Prime Minister Takaichi might not live up to her pledge to cut taxes on food due to worries about the fiscal impact.
  • The Bank of England voted 5-4 to keep its bank rate at 3.75%.
  • The European Central Bank left its deposit facility rate at 2.00%, interest rate at 2.15%, and marginal facility lending rate at 2.40%.
  • Expectations for a near-term reserve requirement ratio cut from the People's Bank of China are on the low side, though the potential for a cut in the second quarter remains alive.
  • Shipper Maersk announced that some corporate positions will be cut and confirmed resumption of transit through the Red Sea.
  • Australia's December trade surplus reached AUD3.373 bln (expected surplus of AUD3.420 bln; last surplus of AUD2.597 bln) as imports fell 0.8% m/m (last -0.2%) and exports rose 1.0% m/m (last -4.0%).
  • Singapore's December Retail Sales fell 5.4% m/m (last -0.2%) but were up 2.7% yr/yr (last 6.2%).
  • Eurozone's December Retail Sales decreased 0.5% m/m (expected -0.2%; last 0.1%) but were up 1.3% yr/yr (expected 1.6%; last 2.4%).
  • Germany's December Factory Orders rose 7.8% m/m (expected -1.8%; last 5.7%).
  • U.K.'s January S&P Global Construction PMI hit 46.4 (expected 42.2; last 40.1).
  • France's December Industrial Production was down 0.7% m/m (expected 0.2%; last 0.1%).
  • Italy's December Retail Sales decreased 0.8% m/m (expected -0.4%; last 0.5%) but were up 0.9% yr/yr (last 1.3%).
• Today's Data:
  • Initial jobless claims for the week ending January 31 increased by 22,000 to 231,000 (Briefing.com consensus: 210,000). Continuing jobless claims for the week ending January 24 increased by 25,000 to 1.844 million.
    • The key takeaway from the report was the jump in initial claims, which hit their highest level since early December. That created some headline surprise, but to be fair, the absolute level isn't that bad.
  • Job openings fell to 6.542 million in December from a revised 6.928 million (from 7.146 million) in November.
  • Weekly natural gas inventories decreased by 360 bcf after decreasing by 242 bcf a week ago.
• Commodities:
  • WTI crude: -2.9% to $63.26/bbl
  • Gold: -1.1% to $4892.10/ozt
  • Copper: -0.5% to $5.82/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1794
  • GBP/USD: -0.8% to 1.3548
  • USD/CNH: -0.1% to 6.9360
  • USD/JPY: UNCH at 156.87
• The Day Ahead:
  • 10:00 ET: Preliminary February University of Michigan Consumer Sentiment (Briefing.com consensus 54.3; prior 56.4)
  • 15:00 ET: December Consumer Credit (Briefing.com consensus $8.4 bln; prior $4.2 bln)