Bond Market Update

Trump Trade On

• U.S. Treasuries are on track for a sharply lower start with longer tenors set to lead the early selling after the night brought news of former President Trump securing a return to the White House. In addition, there will be a Republican majority in the Senate. In addition to weakness in Treasuries, The Trump trade has featured a spike in the dollar, and considerable strength in small cap stocks with futures on the Russell 2000 soaring 6.0%. The sharply lower start in Treasuries is lifting yields on longer tenors back to their July highs while the 2-yr yield is at its highest level since the start of August. Crude oil is giving back the bulk of its gains from the past two days while the U.S. Dollar Index is up 1.8% at 105.32, reaching a level not seen since early July. The U.S. Treasury will cap this week's note and bond auction slate with a $25 bln 30-yr bond sale at 13:00 ET.
• Yield Check:
  • 2-yr: +5 bps to 4.26%
  • 3-yr: +8 bps to 4.24%
  • 5-yr: +11 bps to 4.28%
  • 10-yr: +16 bps to 4.45%
  • 30-yr: +19 bps to 4.64%

• News:
  • The latest policy Minutes from the Bank of Japan showed expectations for a gradual increase in interest rates.
  • Australia signed a comprehensive economic partnership pact with United Arab Emirates.
  • The Tokyo Stock Exchange extended its session by 30 minutes.
  • Japan's October Services PMI hit 49.7 (expected 49.3; last 53.1) and November Reuters Tankan Index fell to 5 from 7.
  • India's October Services PMI hit 58.5 (expected 58.3; last 57.7).
  • Australia's October AIG Manufacturing Index hit -19.7 (last -33.6) and AIG Construction Index hit -40.9 (last -19.8).
  • New Zealand's Q3 Employment decreased by 0.5% qtr/qtr (expected -0.4%; last 0.4%). Q3 Labor Cost Index was up 0.6% qtr/qtr (expected 0.7%; last 0.9%), rising 3.4% yr/yr, as expected (last 3.6%). Q3 Unemployment Rate rose to 4.8% from 4.6% (expected 5.0%) and Q3 Participation Rate fell to 71.2% from 71.7% (expected 71.5%).
  • Eurozone's October Services PMI hit 51.6 (expected 51.2; last 51.4). September PPI was down 0.6% m/m (expected -0.5%; last 0.6%), falling 3.4% yr/yr (expected -3.5%; last -2.3%).
  • Germany's October Services PMI hit 51.6 (expected 51.4; last 50.6) and September Factory Orders rose 4.2% m/m (expected 1.6%; last -5.4%).
  • U.K.'s October Construction PMI hit 54.3 (expected 55.3; last 57.2).
  • France's October Services PMI hit 49.2 (expected 48.3; last 49.6).
  • Italy's October Services PMI hit 52.4 (expected 50.3; last 50.5). · Spain's October Services PMI hit 54.9 (expected 56.6; last 57.0).
• Commodities:
  • WTI Crude: -2.1% to $70.46/bbl
  • Gold: -1.5% to $2707.90/ozt
  • Copper: -4.1% to $4.294/lb
• Currencies:
  • EUR/USD: -2.3% to 1.0683
  • GBP/USD: -1.5% to 1.2843
  • USD/CNH: +1.4% to 7.2019
  • USD/JPY: +1.9% to 154.40
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -10.8%; prior -0.1%)
  • 10:30 ET: Weekly crude oil inventories (prior -0.515 mln)
• Treasury Auctions:
  • 13:00 ET: $25 bln 30-yr Treasury bond auction results