Bond Market Update

Expected Global Central Bank Tightening Weighs

• U.S. Treasuries retreated on Thursday, lifting yields back to their highest levels of the week. Treasuries slumped out of the gate with the belly leading the early weakness after an overnight focus on likely tightening by three major central banks. Expectations for a December rate hike from the Bank of Japan lifted the 10-yr JGB yield above 1.90%, a level not seen since 2007. Expectations for an eventual rate hike from the Reserve Bank of Australia have also continued building after the release of strong household spending data. Finally, People's Bank of China Governor Pan described the central bank's policy as prudent in an op-ed, which represented a change from the summer when policy was described as moderately loose. Treasuries saw a quick extension of their opening losses after the latest Initial Claims report showed just 191,000 new claims (Briefing.com consensus 220,000), which was the lowest total in nearly two years. Treasuries briefly bounced above their opening levels as the morning went on, but renewed pressure sent the complex to fresh lows ahead of the close with yields settling at their highest levels of the week. Crude oil built on yesterday's gain while the U.S. Dollar Index rose 0.1% to 98.98.
• Yield Check:
  • 2-yr: +4 bps to 3.53%
  • 3-yr: +5 bps to 3.55%
  • 5-yr: +6 bps to 3.68%
  • 10-yr: +5 bps to 4.11%
  • 30-yr: +4 bps to 4.77%

• News:
  • The Atlanta Fed's GDPNow forecast for Q3 GDP was lowered to 3.8% from 3.9% in the previous estimate.
  • President Trump announced a plan to loosen fuel efficiency standards for passenger vehicles.
  • Japan's 10-yr yield climbed above 1.90% to its highest level since 2007 despite a strong 30-yr JGB auction.
  • Expectations for 2026 rate hike from the Reserve Bank of Australia climbed again after the release of a strong Household Spending report.
  • The Bank of England's Decision Maker Panel left its year-ahead CPI forecast at 3.4% while the three-year outlook was increased to 3.0% from 2.9%.
  • European Central Bank policymaker Cipollone said that the governing council is making decisions on a per-meeting basis and that the economy has been resilient.
  • Australia's October trade surplus reached AUD4.385 bln (expected surplus of AUD4.440 bln; last surplus of AUD3.707 bln) as imports grew 2.0% m/m (last 1.8%) and exports rose 3.4% m/m (last 7.6%). October Household Spending was up 1.3% m/m (last 0.3%), rising 5.6% yr/yr (last 5.1%).
  • Eurozone's October Retail Sales were unchanged m/m, as expected (last 0.1%), rising 1.5% yr/yr (expected 1.4%; last 1.2%).
  • U.K.'s November Construction PMI hit 39.4 (expected 44.5; last 44.1).
  • Swiss November Unemployment Rate remained at 3.0%, as expected. November Manufacturing PMI hit 49.7 (expected 48.9; last 48.2).
• Today's Data:
  • Initial jobless claims for the week ending November 29 decreased by 27,000 to 191,000 (Briefing.com consensus 220,000) from last week's revised level of 218,000 (from 216,000). This was the first weekly total below 200,000 since January 2024. Continuing jobless claims for the week ending November 22 decreased by 4,000 to 1.939 million from last week's revised level of 1.943 million (from 1.960 million).
    • The key takeaway from the report is initial claims dropped to their lowest level in nearly two years, which is an encouraging sign about the health of a labor market at a time when visibility remains reduced due to some missing Employment Situation reports from the BLS.
  • Factory orders increased 0.2% month-over-month in September (Briefing.com consensus 0.2%) after rising a revised 1.3% (from 1.4%) in August. Excluding transportation, factory orders also increased 0.2% after dipping a revised 0.1% (from +0.1%) in August. Shipments of manufactured goods were unchanged after decreasing a revised 0.3% in August (from -0.1%)
    • The key takeaway from the report is that orders increased again in September despite a big jump in August with new orders for nondefense capital goods excluding aircraft, which is a proxy for business spending, jumping 0.9% for the second month in a row.
• Commodities:
  • WTI crude: +1.2% to $59.68/bbl
  • Gold: +0.3% to $4243.60/ozt
  • Copper: -0.2% to $5.38/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1650
  • GBP/USD: -0.1% to 1.3338
  • USD/CNH: +0.2% to 7.0695
  • USD/JPY: -0.1% to 155.04
• The Day Ahead:
  • 10:00 ET: September Personal Income (Briefing.com consensus 0.4%; prior 0.4%), Personal Spending (Briefing.com consensus 0.4%; prior 0.6%), PCE Prices (Briefing.com consensus 0.3%; prior 0.3%), Core PCE Prices (Briefing.com consensus 0.3%; prior 0.2%), October Factory Orders (Briefing.com consensus -0.3%), and preliminary December University of Michigan Consumer Sentiment (Briefing.com consensus 52.0; prior 51.0)
  • 15:00 ET: October Consumer Credit (Briefing.com consensus $9.8 bln; prior $13.1 bln)

Staying in the Red

• Longer-dated Treasuries continue hovering near their starting levels, having seen very limited movement since our last update. The morning release of a much better-than-expected weekly Initial Claims report invited a brief slip to lows that was followed by a rise above the day's starting levels. However, some overall pressure has persisted, keeping 2s and 5s at their lowest levels of the day while longer tenors have shown some more resilience. Equities, meanwhile, have continued navigating a narrow range near their flat lines with the S&P 500 up just 0.1% at this time.
• Yield Check:
  • 2-yr: +3 bps to 3.52%
  • 3-yr: +5 bps to 3.55%
  • 5-yr: +5 bps to 3.67%
  • 10-yr: +4 bps to 4.10%
  • 30-yr: +3 bps to 4.76%

Opening Losses Maintained

• U.S. Treasuries are hanging onto their early losses, which leaves action near levels seen at the start of the cash session. Treasuries followed their lower start with a quick extension of their losses in reaction to a weekly Initial Claims report (191,000; Briefing.com consensus 220,000) that featured the lowest number of weekly claims in nearly two years. The post-data dip lifted yields on 5s and longer tenors back to their highs from Tuesday, but that's where the market found some support, returning to its opening levels over the next 90 minutes. Equities are off to a subdued start with the S&P 500 shedding 0.1%.
• Yield Check:
  • 2-yr: +3 bps to 3.52%
  • 3-yr: +4 bps to 3.54%
  • 5-yr: +4 bps to 3.67%
  • 10-yr: +4 bps to 4.09%
  • 30-yr: +3 bps to 4.75%

Data Recon

• Factory orders increased 0.2% month-over-month in September (Briefing.com consensus 0.2%) after rising a revised 1.3% (from 1.4%) in August. Excluding transportation, factory orders also increased 0.2% after dipping a revised 0.1% (from +0.1%) in August. Shipments of manufactured goods were unchanged after decreasing a revised 0.3% in August (from -0.1%).
  • The key takeaway from the report is that orders increased again in September despite a big jump in August with new orders for nondefense capital goods excluding aircraft, which is a proxy for business spending, jumping 0.9% for the second month in a row.
• Yield Check:
  • 2-yr: +3 bps to 3.52%
  • 3-yr: +4 bps to 3.54%
  • 5-yr: +5 bps to 3.67%
  • 10-yr: +4 bps to 4.10%
  • 30-yr: +3 bps to 4.76%

Data Recon

• Initial jobless claims for the week ending November 29 decreased by 27,000 to 191,000 (Briefing.com consensus 220,000) from last week's revised level of 218,000 (from 216,000). This was the first weekly total below 200,000 since January 2024. Continuing jobless claims for the week ending November 22 decreased by 4,000 to 1.939 million from last week's revised level of 1.943 million (from 1.960 million).
  • The key takeaway from the report is initial claims dropped to their lowest level in nearly two years, which is an encouraging sign about the health of a labor market at a time when visibility remains reduced due to some missing Employment Situation reports from the BLS.
• Yield Check:
  • 2-yr: +2 bps to 3.51%
  • 3-yr: +3 bps to 3.53%
  • 5-yr: +4 bps to 3.67%
  • 10-yr: +4 bps to 4.09%
  • 30-yr: +3 bps to 4.75%