Bond Market Update

Attempting Another Rally

• U.S. Treasuries are on track for a higher start, looking to recover their losses from Thursday. Treasury futures inched higher during the Asian session, accelerating their advance after the release of disappointing flash November PMI readings from major European economies. The readings showed a deepening contraction in Manufacturing in the eurozone (45.2; prior 46.0) and the U.K. (48.6; prior 49.9) and an unexpected contraction in eurozone's Services PMI (49.2; expected 51.6). Earlier in the night, Manufacturing PMI readings from Asia-Pacific showed an ongoing contraction in Japan (49.0) and Australia (49.4) while Japan's Services PMI (50.2) returned to expansion and Australia's reading (49.6) fell into contraction. The U.S. session will also feature the release of Manufacturing (prior 48.5) and Services PMI (prior 55.0) readings at 9:45 ET, followed by final November consumer sentiment survey from the University of Michigan (Briefing.com consensus 73.0; prior 73.0). There has been ongoing speculation about President-elect Trump's cabinet with The Wall Street Journal reporting that Kevin Warsh has a high chance of becoming Secretary of the Treasury and could be nominated to succeed Fed Chairman Powell in 2026. Crude oil is giving back some of this week's rally while the U.S. Dollar Index is up 0.5% at 107.55, hitting a two-year high.
• Yield Check:
  • 2-yr: -2 bps to 4.33%
  • 3-yr: -3 bps to 4.27%
  • 5-yr: -4 bps to 4.27%
  • 10-yr: -4 bps to 4.39%
  • 30-yr: -4 bps to 4.58%

• News:
  • President-elect Trump nominated Pam Bondi for Attorney General.
  • China's 10-yr note auction saw strong demand, pricing just above record low yield.
  • Japan's Prime Minister Ishiba said that the stimulus package will total JPY39 trln with JPY13.9 trln coming from the general account.
  • Germany's SPD is expected to nominate Chancellor Scholz for re-election on Monday with a snap election planned for February.
  • Japan's October CPI was up 0.6% m/m (last -0.3%), rising 2.3% yr/yr (last 2.5%). October Core CPI was up 2.3% yr/yr (expected 2.2%; last 2.4%). Flash November Manufacturing PMI hit 49.0 (expected 49.5; last 49.2) and flash Services PMI hit 50.2 (last 49.7).
  • India's flash November Manufacturing PMI hit 57.3 (last 57.5) and flash Services PMI hit 59.2 (last 58.5).
  • Singapore's Q3 GDP expanded 5.4% yr/yr (last 3.0%).
  • Australia's flash November Manufacturing PMI hit 49.4 (last 47.3) and flash Services PMI hit 49.6 (last 51.0).
  • Eurozone's flash November Manufacturing PMI hit 45.2 (expected 46.0; last 46.0) and flash Services PMI hit 49.2 (expected 51.6; last 51.6)
  • Germany's Q3 GDP expanded 0.1% qtr/qtr (expected 0.2%; last 0.2%) but was down 0.3% yr/yr (expected -0.2%; last -0.2%). Flash November Manufacturing PMI hit 43.2 (expected 43.1; last 43.0) and flash Services PMI hit 49.4 (expected 51.8; last 51.6).
  • U.K.'s October Retail Sales fell 0.7% m/m (expected -0.3%; last 0.1%) but were up 2.4% yr/yr (expected 3.4%; last 3.2%). October Core Retail Sales fell 0.9% m/m (expected -0.3%; last 0.1%) but were up 2.0% yr/yr (expected 3.3%; last 3.2%). Flash November Manufacturing PMI hit 48.6 (expected 50.1; last 49.9) and flash Services PMI hit 50.0 (expected 52.3; last 52.3).
• Commodities:
  • WTI Crude: -0.6% to $69.68/bbl
  • Gold: +1.2% to $2706.40/ozt
  • Copper: -1.4% to $4.07/lb
• Currencies:
  • EUR/USD: -0.7% to 1.0404
  • GBP/USD: -0.6% to 1.2509
  • USD/CNH: UNCH at 7.2573
  • USD/JPY: UNCH at 154.51
• Data out Today:
  • 9:45 ET: Flash November S&P Global U.S. Manufacturing PMI (prior 48.5) and flash November S&P Global U.S. Services PMI (prior 55.0)
  • 10:00 ET: Final November University of Michigan Consumer Sentiment (Briefing.com consensus 73.0; prior 73.0)