Bond Market Update

Bounce Extended

• U.S. Treasuries are on track for a modestly higher start with longer tenors set to pace an extension of yesterday's advance. Treasury futures spent the early part of the night in a sideways range, rising to highs at the start of the European session, followed by some backtracking. The modest gains took place alongside a rise in other sovereign debt after China's underwhelming stimulus announcement. Meanwhile in Japan, the leader of DPP is refusing to vote on a budget due to flagging support for the ruling coalition ahead of Monday's vote on Prime Minister Ishiba's future. There is also growing political uncertainty in Germany, where Chancellor Scholz is reportedly being pressured to hold a confidence vote in the coming days rather than waiting until January. The U.S. session will be relatively quiet on the data front with the Preliminary November University of Michigan Consumer Sentiment (Briefing.com consensus 70.6; prior 70.5) as the lone release on today's docket. Crude oil is slipping back to its 50-day moving average (70.84) while the U.S. Dollar Index is little changed at 104.56, looking to add 0.2% for the week, which saw a brief run to a level not seen since early July.
• Yield Check:
  • 2-yr: -3 bps to 4.19%
  • 3-yr: -3 bps to 4.15%
  • 5-yr: -3 bps to 4.16%
  • 10-yr: -4 bps to 4.30%
  • 30-yr: -4 bps to 4.50%

• News:
  • China will spend $1.4 trln over the next five years to support local government debt, but the announcement did not feature any support for consumption, which the market had hoped for.
  • China's President Xi will visit Peru and Brazil later this month.
  • Japan's September Household Spending was down 1.3% m/m (expected -0.7%; last 2.0%), falling 1.1% yr/yr (expected -1.8%; last -1.9%). September Leading Index rose to 109.4 from 106.9 (expected 108.9) and Coincident Indicator was up 1.7% m/m (last -3.2%).
  • France's September trade deficit reached EUR8.3 bln (expected deficit of EUR7.0 bln; last deficit of EUR7.7 bln) and September Current Account deficit reached EUR2.1 bln (last deficit of EUR1.2 bln).
  • Italy's September Industrial Production was down 0.4% m/m, as expected (last 0.0%), falling 4.0% yr/yr (last -3.2%). September Retail Sales rose 1.2% m/m (expected 0.2%; last -0.3%), increasing 0.7% yr/yr (last 0.9%).
  • Swiss Q4 SECO Consumer Climate fell to -27 from -19 (expected -33).
• Commodities:
  • WTI Crude: -1.7% to $71.14/bbl
  • Gold: -0.3% to $2698.50/ozt
  • Copper: -2.2% to $4.335/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0773
  • GBP/USD: -0.3% to 1.2947
  • USD/CNH: +0.5% to 7.1815
  • USD/JPY: -0.3% to 152.44
• Data out Today:
  • 10:00 ET: Preliminary November University of Michigan Consumer Sentiment (Briefing.com consensus 70.6; prior 70.5)