Bond Market Update

Long End Lags Again

• U.S. Treasuries are on track for a modestly lower start with longer tenors expected to show slight relative weakness, making for a continuation of yesterday's underperformance. Treasury futures inched higher during the Asian session, reversing once the focus turned to Europe. The overnight retreat deepened after it was reported that the NFIB Small Business Optimism Index rose to 101.7 in November from 93.7 in October, reaching its highest level since mid-2021. Overseas, China reported a larger-than-expected trade surplus for November, but that was due to imports decreasing by the largest amount in over a year, reflecting poor domestic demand, while export growth undershot estimates, reflecting soft global demand. Economic data flow was light during the European session with Germany's final CPI report from November remaining unrevised from the flash reading. The U.S. session will feature the release of revised Productivity (Briefing.com consensus 2.2%; prior 2.2%) and Unit Labor Costs (Briefing.com consensus 1.9%; prior 1.9%) for Q3 and the U.S. Treasury will sell $58 bln in 3-yr notes this afternoon. Crude oil is giving back some of yesterday's gain while the U.S. Dollar Index is up 0.2% at 106.36.
• Yield Check:
  • 2-yr: +2 bps to 4.15%
  • 3-yr: +2 bps to 4.11%
  • 5-yr: +3 bps to 4.10%
  • 10-yr: +4 bps to 4.24%
  • 30-yr: +4 bps to 4.43%

• News:
  • China's Premier Li said that more unilateral policies for opening up the economy will be introduced.
  • The Reserve Bank of Australia left its cash rate at 4.35%, as expected.
  • India appointed Sanjay Malhotra as the new governor of the Reserve Bank of India.
  • France's Socialist party is calling for an appointment of a left wing prime minister, threatening to abandon discussions if the demand is not granted.
  • British Chancellor Reeves is calling on government departments to reduce their budgets by 5%.
  • China's November trade surplus reached $97.44 bln (expected surplus of $94.00 bln; last surplus of $95.27 bln) as imports fell 3.9% yr/yr (expected 0.3%; last -2.3%) and exports rose 6.7% yr/yr (expected 8.5%; last 12.7%).
  • Japan's November Machine Tool Orders were up 3.0% yr/yr (last 9.3%).
  • Australia's November NAB Business Survey fell to 2 from 7 and Business Confidence fell to -3 from 5.
  • Germany's November CPI was down 0.2% m/m, as expected (last 0.4%) but up 2.2% yr/yr, as expected (last 2.0%).
  • Italy's October Industrial Production was unchanged m/m (expected -0.1%; last -0.3%), falling 3.6% yr/yr (last -3.9%).
• Commodities:
  • WTI Crude: -0.4% to $68.12/bbl
  • Gold: +0.5% to $2698.90/ozt
  • Copper: -0.8% to $4.241/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0531
  • GBP/USD: +0.1% to 1.2756
  • USD/CNH: -0.1% to 7.2594
  • USD/JPY: +0.4% to 151.78
• Data out Today:
  • 6:00 ET: November NFIB Small Business Optimism Index (actual 101.7; prior 93.7)
  • 8:30 ET: Revised Q3 Productivity (Briefing.com consensus 2.2%; prior 2.2%) and Unit Labor Costs (Briefing.com consensus 1.9%; prior 1.9%)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results