Bond Market Update

Treasuries Withstand Early Pressure

• U.S. Treasuries began the week with slim gains across the curve after a steady bounce off morning lows in longer tenors. The trading day started with sizable losses in 10s and 30s and relative strength up front, but the entire complex staged a quick bounce, eventually lifting all tenors into positive territory. The lower start followed a weekend Lower House election in Japan, which produced the biggest post-war win for the ruling LDP. Prime Minister Takaichi is now free to implement her agenda without big roadblocks. Finance Minister Katayama said that there will be no additional bond issuance to fund the prime minister's agenda, which was encouraging to hear. Longer tenors spent the entire session in a slow rise off their early lows while shorter tenors spent the day near lows, though they still managed a higher finish. The market did not receive any economic data today, but the New York Fed released its Survey of Consumer Expectations for January, which showed a dip in year-ahead inflation expectations to 3.1% from 3.4% while three- and five-year expectations remained at 3.0%. Crude oil climbed back above $64/bbl while the U.S. Dollar Index fell 0.8% to 96.82.
• Yield Check:
  • 2-yr: -2 bps to 3.48%
  • 3-yr: -2 bps to 3.55%
  • 5-yr: -1 bp to 3.74%
  • 10-yr: -1 bp to 4.20%
  • 30-yr: -1 bp to 4.85%
• News:
  • Alphabet (GOOG) sold seven tranches of debt, including a British pound-denominated 100-yr bond.
  • Thailand's election produced a three-way deadlock that was largely expected.
  • China has resumed some rare earth exports to Japan.
  • Australia placed a 10% tariff on steel imports from China.
  • Bank of France Governor Villeroy de Galhau will resign from his position in June and also vacate his position as Chair of the Board of Directors of the Bank for International Settlements.
  • Speculation is on the rise that British Prime Minister Starmer could be ousted after his unimpressive visit to China and growing focus on his knowledge of Lord Mandelson's ties to Jeffrey Epstein.
  • A weekend election in Spain resulted in a rightward shift with Prime Minister Sanchez's Socialist party seeing its support fall to 24.5% from 29.5%.
  • Socialist Jose Seguro was elected Portugal's president.
  • Japan's December Overall Wage Income 2.4% yr/yr (expected 3.0%; last 1.7%). December Current Account surplus JPY2.70 trln (expected surplus of JPY2.95 trln; last surplus of JPY3.14 trln). January Bank Lending 4.5% yr/yr, as expected (last 4.3%) and January Economy Watchers Current Index 47.8 (expected 49.1; last 47.7)
  • Eurozone's February Sentix Investor Confidence rose to 4.2 from -1.8 (expected -0.2).
  • Swiss Q1 SECO Consumer Climate rose to -30 from -37, as expected.
• Commodities:
  • WTI crude: +1.2% to $64.33/bbl
  • Gold: +2.0% to $5078.50/ozt
  • Copper: +1.4% to $5.96/lb
• Currencies:
  • EUR/USD: +0.9% to 1.1920
  • GBP/USD: +0.7% to 1.3697
  • USD/CNH: -0.2% to 6.9149
  • USD/JPY: -0.9% to 155.73
• The Day Ahead:
  • 6:00 ET: January NFIB Small Business Optimism (prior 99.5)
  • 8:30 ET: Q3 Employment Cost Index (Briefing.com consensus 0.8%; prior 0.8%), December Retail Sales (Briefing.com consensus 0.4%; prior 0.6%), Retail Sales ex-auto (Briefing.com consensus 0.4%; prior 0.5%), and December Import/Export Prices
  • 10:00 ET: November Business Inventories (Briefing.com consensus 0.2%; prior 0.3%) and November Factory Orders (Briefing.com consensus 0.5%; prior -1.3%)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results