Bond Market Update

Trying to Bounce

• U.S. Treasuries are on track for a higher start with longer tenors set to show early relative strength after outperforming last week. Treasury futures jumped last evening as reports spread that President-elect Trump is appointing Scott Bessent as Treasury Secretary. Mr. Bessent supports a policy of reducing the budget deficit to 3% by 2028, increasing GDP growth to 3% with help from deregulation, and producing an additional 3 million barrels of oil per day. Treasury futures overtook their early highs at the start of the European session, though recent trade has seen a return to last night's opening levels. Overseas news flow was on the light side, though it is worth noting that the French government may face a no-confidence vote as parties struggle to agree on a budget. Crude oil is little changed while the U.S. Dollar Index is down 0.6% at 106.96 as the greenback gives back some of last week's gains. The market will not receive any data today, but the U.S. Treasury will sell $69 bln in 2-yr notes.
• Yield Check:
  • 2-yr: -2 bps to 4.35%
  • 3-yr: -3 bps to 4.28%
  • 5-yr: -5 bps to 4.25%
  • 10-yr: -6 bps to 4.35%
  • 30-yr: -7 bps to 4.53%

• News:
  • Japan's cabinet approved the extra stimulus of JPY39 trln.
  • The People's Bank of China refinanced loans through its medium-term lending facility rate but left the rate at 2.0%.
  • The Reserve Bank of New Zealand's shadow board is calling for a 50-basis point rate cut later this week.
  • European officials have reportedly made some progress toward eliminating tariffs on imports of electric vehicles from China.
  • European Central Bank policymaker Kazaks spoke in favor of a December rate cut.
  • Japan's September Leading Index hit 109.1 (expected 109.4; last 106.9) and Coincident Indicator was up 1.3% m/m (last 1.7%).
  • Singapore's October CPI was down 0.3% m/m (last 0.3%) but up 1.4% yr/yr (expected 1.8%; last 2.0%). October Core CPI was up 2.1% yr/yr (expected 2.5%; last 2.8%).
  • New Zealand's Q3 Retail Sales were down 0.1% qtr/qtr (expected -0.5%; last -1.2%) and Core Retail Sales fell 0.8% qtr/qtr (expected -0.3%; last -1.0%). October trade deficit reached NZD1.54 bln (expected deficit of NZD1.76 bln; last deficit of NZD2.15 bln).
  • Germany's November ifo Business Climate Index fell to 85.7 from 86.5 (expected 86.1). November Business Expectations dipped to 87.2 from 87.3 (expected 87.0) and Current Assessment fell to 84.3 from 85.7 (expected 85.4).
  • Spain's October PPI was down 3.9% yr/yr (last -5.2%). 
  • Swiss Q3 Employment Level rose to 5.528 mln from 5.499 mln.
• Commodities:
  • WTI Crude: -0.1% to $71.13/bbl
  • Gold: -1.0% to $2684.50/ozt
  • Copper: +0.5% to $4.11/lb
• Currencies:
  • EUR/USD: +0.7% to 1.0489
  • GBP/USD: +0.3% to 1.2568
  • USD/CNH: -0.1% to 7.2472
  • USD/JPY: -0.4% to 154.19
• No Data on Today's Schedule
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results