Bond Market Update

Strong Auction Supports Monday Rally

• U.S. Treasuries had a strong showing to begin the week, emboldened by news of what is thought to be a capable nominee to lead the Department of the Treasury. The trading day started with solid gains after an overnight rally in reaction to news that President-elect Trump is nominating Scott Bessent as Treasury Secretary. The early gains were extended during the first hour of action, followed by another wave of buying after the U.S. Treasury kicked off this week's note auction slate with a stellar $69 bln 2-yr note offering. Today's advance left yields on 5s and longer tenors just above their lowest levels of the month while the 2-yr yield reversed from its November high (4.393%) with its 200-day moving average (4.410) looming just above. Crude oil reversed from its best level in nearly three weeks while the U.S. Dollar Index fell 0.7% to 106.84.
• Yield Check:
  • 2-yr: -10 bps to 4.27%
  • 3-yr: -10 bps to 4.21%
  • 5-yr: -13 bps to 4.17%
  • 10-yr: -15 bps to 4.27%
  • 30-yr: -15 bps to 4.45%

• News:
  • Germany's SPD nominated Olaf Scholz as its candidate for chancellor.
  • There was growing concern that Marine Le Pen could force a no-confidence motion against the current French government, which is struggling to agree on a budget.
  • 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 cabinet approved JPY39 trln extra stimulus.
  • 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.
  • 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.
• Today's Data:
  • $69 bln 2-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.274% (4.444%).
    • Bid-to-cover: 2.77 (2.61).
    • Indirect bid: 71.6% (64.7%).
    • Direct bid: 19.2% (20.5%).
• Commodities:
  • WTI crude: -3.3% to $68.93/bbl
  • Gold: -3.5% to $2619.10/ozt
  • Copper: +0.2% to $4.10/lb
• Currencies:
  • EUR/USD: +0.8% to 1.0505
  • GBP/USD: +0.3% to 1.2573
  • USD/CNH: -0.2% to 7.2443
  • USD/JPY: -0.4% to 154.13
• The Day Ahead: 
  • 9:00 ET: September FHFA Housing Price Index (prior 0.3%) and September S&P Case-Shiller Home Price Index (Briefing.com consensus 4.7%; prior 5.2%)
  • 10:00 ET: November Consumer Confidence (Briefing.com consensus 113.0; prior 108.7) and October New Home Sales (Briefing.com consensus 718,000; prior 738,000)
  • 14:00 ET: November FOMC Minutes
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results