Bond Market Update

Recent Gains Extended

• U.S. Treasuries climbed on Friday, building on their gains from this week. The trading day started with solid gains that were paced by the front end after overnight action featured weakness in most global equity markets. Investors received a sizable batch of economic data, which showed another contractionary reading of Japan's Manufacturing PMI (48.8) for November while eurozone's Manufacturing PMI (49.7) dipped back into contraction after expanding in October. Eurozone's Services PMI (53.1) was a bright spot, showing a slight uptick in the pace of growth. In the U.S., both readings remained in expansion. Treasuries added to their opening gains during the first hour of action, remaining near their best levels into the late morning. The rest of the day featured some backtracking that was paced by the long bond with assistance from a bounce in equities. The market heard from New York Fed President Williams, who said that he sees more room for adjusting policy. The comments from the permanent FOMC voter fueled a big jump in December rate cut expectations, sending the implied likelihood to nearly 70.0% from yesterday's 39.1%. Treasuries reached intraday lows around midday, rising back to their starting levels in late trade. Crude oil fell toward $58/bbl while the U.S. Dollar Index spent the day near its flat line at 100.15, adding 0.9% for the week.
• Yield Check:
  • 2-yr: -5 bps to 3.51% (-10 bps this week)
  • 3-yr: -5 bps to 3.50% (-12 bps this week)
  • 5-yr: -6 bps to 3.62% (-12 bps this week)
  • 10-yr: -4 bps to 4.06% (-9 bps this week)
  • 30-yr: -2 bps to 4.72% (-3 bps this week)

• News:
  • Japan's cabinet office approved an JPY21.3 trln stimulus package, which had been expected. It is expected to boost economic growth by nearly 1.5% per year. However, JGB issuance in 2026 is expected to be down compared to 2025.
  • South Korea's exports for the first 20 days of November were up 8.2% year-over-year with chip exports rising 26.5%.
  • China's October FDI was down 10.3% YTD (last -10.4%).
  • Japan's October National CPI was up 0.4% m/m (last 0.1%), rising 3.0% yr/yr (last 2.9%). October National Core CPI was up 3.0% yr/yr, as expected (last 2.9%). October trade balance reached JPY0 trln (expected deficit of JPY130 bln; last deficit of JPY300 bln) as imports grew 0.7% yr/yr (expected -0.7%; last 3.0%) and exports rose 3.6% yr/yr (expected 1.1%; last 4.2%). Flash November Manufacturing PMI hit 48.8, as expected (last 48.2) and flash Services PMI hit 53.1 (last 53.1).
  • South Korea's October PPI was up 0.2% m/m (last 0.4%), rising 1.5% yr/yr (last 1.2%).
  • Singapore's Q3 GDP expanded 2.4% qtr/qtr (expected 1.3%; last 1.7%), growing 4.2% yr/yr (expected 2.9%; last 4.7%).
  • India's November flash Manufacturing PMI hit 57.4 (expected 59.0; last 59.2) and flash Services PMI hit 59.5 (expected 59.7; last 58.9). 
  • Australia's flash November Manufacturing PMI hit 51.6 (last 49.7) and flash Services PMI hit 52.7 (last 52.5).
  • New Zealand's October trade deficit reached NZD1.54 bln (expected deficit of NZD955 mln; last deficit of NZD1.384 bln). October Credit Card Spending was up 1.4% yr/yr (last 0.3%).
  • Eurozone's flash November Manufacturing PMI hit 49.7 (expected 50.1; last 50.0) and flash Services PMI hit 53.1 (expected 52.8; last 53.0).
  • Germany's flash November Manufacturing PMI hit 48.4 (expected 49.8; last 49.6) and flash Services PMI hit 52.7 (expected 54.0; last 54.6).
  • U.K.'s October Retail Sales were down 1.1% m/m (expected -0.1%; last 0.7%) but up 0.2% yr/yr (expected 1.5%; last 1.0%). October Core Retail Sales were down 1.0% m/m (expected -0.2%; last 0.7%) but up 1.2% yr/yr (expected 2.5%; last 1.7%). October Public Sector Net Borrowing reached GBP17.43 bln (expected GBP15.20 bln; last GBP19.89 bln). Flash November Manufacturing PMI hit 50.2 (expected 49.3; last 49.7) and flash Services PMI hit 50.5 (expected 51.9; last 52.3)
  • France's November Business Survey fell to 98 from 101 (expected 100). Flash November Manufacturing PMI hit 47.8 (expected 49.0; last 48.8) and flash Services PMI hit 50.8 (expected 48.4; last 48.0).
• Today's Data:
  • The final University of Michigan Consumer Sentiment reading for November increased to 51.0 (Briefing.com consensus: 50.3) from the preliminary reading of 50.3 and the final reading of 53.6 for October. In the same period a year ago, the index stood at 71.8.
    • The key takeaway from the report is that consumer sentiment continues to be adversely impacted by the persistence of high prices and weakening incomes.
  • The S&P Global U.S. Manufacturing PMI hit 51.9 in the flash reading for November, down from 52.5 in October.
  • The S&P Global U.S. Services PMI hit 55.0 in the flash reading for November, up from 54.8 in October.
• Commodities:
  • WTI crude: -1.6% to $58.06/bbl
  • Gold: +0.5% to $4079.30/ozt
  • Copper: +1.0% to $5.02/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1513
  • GBP/USD: +0.2% to 1.3102
  • USD/CNH: -0.2% to 7.1055
  • USD/JPY: -0.7% to 156.34
• The Week Ahead:
  • Monday: $69 bln 2-yr Treasury note auction results at 13:00 ET
  • Tuesday: September PPI (Briefing.com consensus 0.3%; prior -0.1%), Core PPI (Briefing.com consensus 0.2%; prior -0.1%), September Retail Sales (Briefing.com consensus 0.4%; prior 0.6%), and Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.7%) at 8:30 ET; September FHFA Housing Price Index (Briefing.com consensus 0.3%; prior 0.4%) and September S&P Case-Shiller Home Price Index (Briefing.com consensus 1.6%; prior 1.6%) at 9:00 ET; November Consumer Confidence (Briefing.com consensus 93.3; prior 94.6) and October Pending Home Sales (Briefing.com consensus 0.0%; prior 0.0%) at 10:00 ET; and $70 bln 5-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -5.2%) at 7:00 ET; September Durable Orders (Briefing.com consensus 0.3%; prior 2.9%), Durable Orders ex-transport (Briefing.com consensus 0.2%; prior 0.4%), October advance International Trade in Goods (prior NA), October advance Retail Inventories (prior NA), October advance Wholesale Inventories (prior NA), weekly Initial Claims (Briefing.com consensus 225,000; prior 220,000), and Continuing Claims (prior 1.974 mln) at 8:30 ET; November Chicago PMI (Briefing.com consensus 44.5; prior 43.8) at 9:45 ET; October New Home Sales (prior NA) at 10:00 ET; weekly crude oil inventories (prior -3.43 mln) at 10:30 ET; weekly natural gas inventories (prior -14 bcf) at 12:00 ET, and $44 bln 7-yr Treasury note auction results at 13:00 ET
  • Thursday: Bond and equity markets closed for Thanksgiving
  • Friday: NYSE to close at 13:00 ET and Treasury market to close at 14:00 ET

Early Gains Narrowed

• U.S. Treasuries have retreated from session highs that were reached in the late morning with the long bond returning to little changed while shorter tenors are hanging onto a portion of their gains. Treasuries backpedaled from their highs in the late morning as equities bounced from a weak start. The early advance pressured the 10-yr yield below its 50-day moving average (4.085%) while the recent pullback returned the benchmark yield to that level. The 10-yr yield is currently on track to surrender six basis points for the week while the 2-yr yield is down eight basis points for the week.
• Yield Check:
  • 2-yr: -3 bps to 3.53%
  • 3-yr: -3 bps to 3.52%
  • 5-yr: -3 bps to 3.65%
  • 10-yr: -2 bps to 4.09%
  • 30-yr: UNCH at 4.73%

Opening Strength Maintained

• U.S. Treasuries are hanging onto their opening gains with issues in the belly maintaining their early strength. The market established a sideways range shortly after the open with 10s and shorter tenor sitting just below their highs at this time while the long bond has dipped from its best level, but it remains comfortably in the green. Economic data released this morning showed continued growth in flash Manufacturing (51.9) and Services (55.0) PMI readings for the U.S. while the University of Michigan's Consumer Sentiment Index hit 51.0 in the final reading for November, up from 50.3 in the preliminary reading, but down from 53.6 in October.
• Yield Check:
  • 2-yr: -6 bps to 3.50%
  • 3-yr: -5 bps to 3.50%
  • 5-yr: -6 bps to 3.62%
  • 10-yr: -4 bps to 4.06%
  • 30-yr: -2 bps to 4.71%

Data Recon

• The final University of Michigan Consumer Sentiment reading for November increased to 51.0 (Briefing.com consensus: 50.3) from the preliminary reading of 50.3 and the final reading of 53.6 for October. In the same period a year ago, the index stood at 71.8.
  • The key takeaway from the report is that consumer sentiment continues to be adversely impacted by the persistence of high prices and weakening incomes.
• Yield Check:
  • 2-yr: -5 bps to 3.51%
  • 3-yr: -5 bps to 3.50%
  • 5-yr: -6 bps to 3.62%
  • 10-yr: -4 bps to 4.06%
  • 30-yr: -2 bps to 4.71%

 On the Rise

• U.S. Treasuries are on track for a higher start with the belly expected to show some relative strength in the early going. Treasury futures spent the first half of the night in a narrow sideways range, rising to highs once the focus shifted to action in Europe. The modest strength in Treasury futures has been accompanied by gains in other sovereign debt while global equity markets have seen a continuation of this week's volatility. Overnight, Japan's cabinet approved its largest stimulus package since the coronavirus pandemic and investors received flash Manufacturing and Services PMI readings from major economies. Japan's Manufacturing PMI (48.8) remained in contraction while eurozone's Manufacturing PMI (49.7) dipped back into contraction and Services PMI (53.1) showed a slight uptick in the pace of growth. PMI readings for the U.S. will also be released this morning. Crude oil is falling past $59/bbl while the U.S. Dollar Index is flat at 100.19.
• Yield Check:
  • 2-yr: -5 bps to 3.51%
  • 3-yr: -5 bps to 3.50%
  • 5-yr: -5 bps to 3.62%
  • 10-yr: -5 bps to 4.06%
  • 30-yr: -2 bps to 4.71%

• News:
  • New York Fed President (FOMC voter) Williams said that he sees more room for adjusting policy.
  • Japan's cabinet office approved an JPY21.3 trln stimulus package, which had been expected. It is expected to boost economic growth by nearly 1.5% per year. However, JGB issuance in 2026 is expected to be down compared to 2025.
  • South Korea's exports for the first 20 days of November were up 8.2% year-over-year with chip exports rising 26.5%.
  • China's October FDI was down 10.3% YTD (last -10.4%).
  • Japan's October National CPI was up 0.4% m/m (last 0.1%), rising 3.0% yr/yr (last 2.9%). October National Core CPI was up 3.0% yr/yr, as expected (last 2.9%). October trade balance reached JPY0 trln (expected deficit of JPY130 bln; last deficit of JPY300 bln) as imports grew 0.7% yr/yr (expected -0.7%; last 3.0%) and exports rose 3.6% yr/yr (expected 1.1%; last 4.2%). Flash November Manufacturing PMI hit 48.8, as expected (last 48.2) and flash Services PMI hit 53.1 (last 53.1).
  • South Korea's October PPI was up 0.2% m/m (last 0.4%), rising 1.5% yr/yr (last 1.2%).
  • Singapore's Q3 GDP expanded 2.4% qtr/qtr (expected 1.3%; last 1.7%), growing 4.2% yr/yr (expected 2.9%; last 4.7%).
  • India's November flash Manufacturing PMI hit 57.4 (expected 59.0; last 59.2) and flash Services PMI hit 59.5 (expected 59.7; last 58.9). 
  • Australia's flash November Manufacturing PMI hit 51.6 (last 49.7) and flash Services PMI hit 52.7 (last 52.5).
  • New Zealand's October trade deficit reached NZD1.54 bln (expected deficit of NZD955 mln; last deficit of NZD1.384 bln). October Credit Card Spending was up 1.4% yr/yr (last 0.3%).
  • Eurozone's flash November Manufacturing PMI hit 49.7 (expected 50.1; last 50.0) and flash Services PMI hit 53.1 (expected 52.8; last 53.0).
  • Germany's flash November Manufacturing PMI hit 48.4 (expected 49.8; last 49.6) and flash Services PMI hit 52.7 (expected 54.0; last 54.6).
  • U.K.'s October Retail Sales were down 1.1% m/m (expected -0.1%; last 0.7%) but up 0.2% yr/yr (expected 1.5%; last 1.0%). October Core Retail Sales were down 1.0% m/m (expected -0.2%; last 0.7%) but up 1.2% yr/yr (expected 2.5%; last 1.7%). October Public Sector Net Borrowing reached GBP17.43 bln (expected GBP15.20 bln; last GBP19.89 bln). Flash November Manufacturing PMI hit 50.2 (expected 49.3; last 49.7) and flash Services PMI hit 50.5 (expected 51.9; last 52.3) 
  • France's November Business Survey fell to 98 from 101 (expected 100). Flash November Manufacturing PMI hit 47.8 (expected 49.0; last 48.8) and flash Services PMI hit 50.8 (expected 48.4; last 48.0).
• Commodities:
  • WTI Crude: -0.9% to $58.50/bbl
  • Gold: +0.1% to $4062.70/ozt
  • Copper: +0.1% to $4.975/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1520
  • GBP/USD: +0.1% to 1.3085
  • USD/CNH: -0.1% to 7.1119
  • USD/JPY: -0.5% to 156.75
• Data out Today:
  • 9:45 ET: Flash November S&P Global U.S. Manufacturing PMI (prior 52.5) and flash November S&P Global U.S. Services PMI (prior 54.8)
  • 10:00 ET: Final November University of Michigan Consumer Sentiment (Briefing.com consensus 50.3; prior 50.3)