US Treasury yields have dipped, led by the longer end of the curve. An easing of tariff fears, falling US yields, along with a lightening of long US dollar positions, have likely led to the US dollar’s latest decline. The US Treasury has also kept its guidance to sell $125bn worth of long-term Treasury debt sale at its quarterly refunding auction this year, possibly easing some fiscal concerns. However, a larger US trade deficit of $98.4bn in December vs. $78.2bn in November could still presage more trade tariff
actions ahead.
Meanwhile, the US labour market has stayed resilient, with the latest ADP data showing private sector firms adding 183k jobs in January vs. an upward revised 176k in December, beating Bloomberg consensus of 150k. But the US ISM services index softened to 52.8 in January, from 54.0 in December, though still in expansionary territory.
In Japan, a faster pace of labour cash earnings (+4.8%yoy in December vs. 3.0%yoy in November and Bloomberg consensus of 3.7%yoy) should help keep BoJ on its rate normalization path this year. This, along with a dip in Treasury yields, will help support
some modest yen strength. - MUFG
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