Bond Market Update

Belly Leads

• U.S. Treasuries are on track for a higher start with issues in the belly expected to recover yesterday's losses at the start. Treasury futures spent the night in a steady ascent, starting with a slow drift higher during the Asian session, followed by a more vigorous push to fresh highs once the focus shifted to action in Europe. The cease fire agreement between Israel and Hezbollah came into effect overnight, providing some relief on the busy geopolitical front. There was no market-moving data, but the U.S. session will feature several reports, including October Personal Income (Briefing.com consensus 0.3%; prior 0.3%) and the second estimate of Q3 GDP (Briefing.com consensus 2.8%; prior 2.8%). Later in the day, the U.S. Treasury will sell $44 bln in 7-yr notes to cap what has been a solid slate of note offerings this week. Crude oil holds a modest gain while the U.S. Dollar Index is down 0.6% at 106.42.
• Yield Check:
  • 2-yr: -4 bps to 4.21%
  • 3-yr: -6 bps to 4.16%
  • 5-yr: -6 bps to 4.13%
  • 10-yr: -4 bps to 4.26%
  • 30-yr: -3 bps to 4.45%

• News: 
  • The Reserve Bank of New Zealand lowered its official cash rate by 50 bps to 4.25%, as expected.
  • There was more speculation that OPEC+ will not announce an output increase on December 1.
  • European Central Bank policymaker Schnabel said she only sees limited room for additional rate cuts and that she doesn't see a recession risk in the eurozone.
  • France's Prime Minister Barnier warned of a financial storm if the budget proposal is not approved.
  • Standard & Poor's is scheduled to announce a review of France's credit rating later this week.
  • China's October Industrial Profit was down 4.3% YTD (last -3.5%).
  • Australia's Q3 Construction Work Done was up 1.6% qtr/qtr (expected 0.4%; last 1.1%). October CPI Indicator remained at 2.1% yr/yr (expected 2.5%).
  • Germany's December GfK Consumer Climate fell to -23.3 from -18.4 (expected -18.8).
  • France's November Consumer Confidence fell to 90 from 93.
  • Swiss November ZEW Expectations fell to -12.4 from -7.7.
• Commodities:
  • WTI Crude: +0.5% to $69.15/bbl
  • Gold: +1.1% to $2651.70/ozt
  • Copper: +0.7% to $4.078/lb
• Currencies:
  • EUR/USD: +0.4% to 1.0530
  • GBP/USD: +0.5% to 1.2629
  • USD/CNH: UNCH at 7.2580
  • USD/JPY: -1.0% to 151.56
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 6.3%; prior 1.7%)
  • 8:30 ET: October Personal Income (Briefing.com consensus 0.3%; prior 0.3%), Personal Spending (Briefing.com consensus 0.2%; prior 0.5%), PCE Prices (Briefing.com consensus 0.2%; prior 0.2%), Core PCE Prices (Briefing.com consensus 0.3%; prior 0.3%), Q3 GDP -- second estimate (Briefing.com consensus 2.8%; prior 2.8%), Q3 GDP Deflator -- second estimate (Briefing.com consensus 1.8%; prior 1.8%), October Durable Orders (Briefing.com consensus 0.4%; prior -0.8%), Durable Orders ex-transportation (Briefing.com consensus 0.3%; prior 0.4%), October advance goods trade balance (prior -$108.2 bln), advance Retail Inventories (prior 0.8%), Advance Wholesale Inventories (prior -0.1%), weekly Initial Claims (Briefing.com consensus 217,000; prior 213,000), and Continuing Claims (prior 1.908 mln)
  • 10:00 ET: October Pending Home Sales (Briefing.com consensus -1.5%; prior 7.4%)
  • 10:30 ET: Weekly crude oil inventories (prior +0.545 mln)
  • 12:00 ET: Weekly natural gas inventories (prior -3 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results