Treasuries are little changed along with core European sovereigns. Steep declines in equities provided some support to bonds, along with some front running of month-end buying, but yields have edged off of overnight lows. The 2-year Treasury is at 2.114% versus 2.104%, with the 10-year at 2.697% versus 2.678%.
Therefore closer to US Market opening, bonds retraced today’s gains with 10-year Treasury, drifting again back to 121.60 levels, by breaking the 20 and 50-period MAs in the hourly charts, after forming an up fractal. This intra-day weakness suggests a retest of S1 at 121.50 level.
On the economic front, Eurozone ESI economic confidence was weaker than expected, while Eurozone Q4 GDP decelerated to 0.6% q/q, while German state inflation data suggested a dip in the headline January HICP all underpinned the pull back in yields and helped weigh on European stock markets. The German Bund led the way lower, slipping to 0.664% before edging to 0.68%. Meanwhile, the markets remain worried over the ECB which is still seen heading for a gradual taper of net asset purchases in Q4.
Today’s U.S. calendar has the start of the two-day FOMC meeting where risk is for a more hawkish tone. Data includes January consumer confidence, the November S&P/Case-Shiller home price index and weekly chain store sales. The earnings calendar picks up pace, with today featuring a number of reports. President Trump delivers his State of the Union tonight.
President Trump’s State of the Union is going to stress infrastructure spending and jobs/wage growth, according to White House economic advisor Gary Cohn in comments in a CNBC interview. Apparently the president will emphasize in tonight’s address a better than $1 tln infrastructure plan, as well as a process to streamline the approval process. Cohn said there’s plenty of money to finance the spending plan — a lot of the problems come with the approval process. The president will also talk about the wealth effect and how people are benefiting from the gains on Wall Street. He expects there will be a lot more regulation reforms than seen in year one. Also he noted the search for a Fed Vice Chair should end relatively shortly, without indicating who it might be.
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