Bond Market Update

Pressure Persists

• U.S. Treasuries are on track for a lower start, set for a continuation of this week's selling that has lifted yields on longer tenors to their highest levels in nearly three weeks. Treasury futures held their ground in early evening trade, falling to lows once the focus shifted to Europe. The night brought a big slate of economic data and other news developments. China's 10-yr yield reached a fresh record low of 1.738% after the Central Economic Work Conference concluded without additional stimulus news other than a reiterated pledge to continue raising deficits and lowering the reserve requirement ratio. In Europe, the U.K. reported weak growth figures for October, but the Bank of England is not expected to lower its bank rate next week. Also of note, French President Macron named Francois Bayrou as the next prime minister and Germany's Chancellor Scholz is set to face a confidence vote on Monday that he is expected to lose. Crude oil is returning to its 50-day moving average (70.31) while the U.S. Dollar Index is down 0.2% at 106.77.
• Yield Check:
  • 2-yr: +2 bps to 4.21%
  • 3-yr: +2 bps to 4.18%
  • 5-yr: +2 bps to 4.20%
  • 10-yr: +3 bps to 4.35%
  • 30-yr: +1 bp to 4.56%

• News:
  • South Korea's opposition party is attempting to impeach President Yoon for the second time.
  • European Central Bank policymakers spoke in favor of additional rate cuts.
  • Bundesbank lowered Germany's growth forecast for 2025 to 0.2% from 1.1% while the outlook for 2026 was trimmed to 0.8% from 1.4%. The CPI forecast for 2025 was lowered to 2.4% from 2.7% while the outlook for 2026 was reduced to 2.1% from 2.2%. 
  • China's November New Loans reached CNY580.0 bln (expected CNY950.0 bln; last CNY500.0 bln). November Outstanding Loans grew 7.7% yr/yr (expected 7.9%; last 8.0%) and total social financing reached CNY2.34 trln (expected CNY2.80 trln; last CNY1.40 trln).
  • Japan's Q4 Tankan All Big Industry Capex was up 11.3% (expected 9.6%; last 10.6%). Q4 Tankan Large Manufacturers Index rose to 14 from 13 (expected 13) and Small Manufacturers Index remained at 0 (expected -2). Q4 Tankan Large Non-Manufacturers Index fell to 33 from 34, as expected, and Small Non-Manufacturers Index rose to 16 from 14 (expected 11). October Industrial Production was up 2.8% m/m (expected 3.0%; last 1.6%) and Capacity Utilization was up 2.6% m/m (last 4.4%).
  • South Korea's November Import Price Index was up 3.0% yr/yr (last -2.5%) and Export Price Index was up 7.0% yr/yr (last 2.0%).
  • New Zealand's November Business PMI hit 45.5 (last 45.8). October External Migration & Visitors increased 6.3% yr/yr (last 0.9%).
  • Eurozone's October Industrial Production was unchanged m/m, as expected (last -1.5%), falling 1.2% yr/yr (expected -1.9%; last -2.2%).
  • Germany's October trade surplus reached EUR13.4 bln (expected surplus of EUR15.7 bln; last surplus of EUR17.0 bln). October imports were down 0.1% m/m (expected -0.6%; last 2.1%) and exports were down 2.8% m/m (expected -2.0%; last -1.7%). November WPI was unchanged m/m (expected 0.2%; last 0.4%), falling 0.6% yr/yr (last -0.8%).
  • U.K.'s October GDP was down 0.1% m/m (expected 0.1%; last -0.1%) but up 1.3% yr/yr (expected 1.6%; last 1.0%). October Construction Output was down 0.4% m/m (expected 0.2%; last 0.1%), falling 0.7% yr/yr (expected 0.0%; last -0.4%). October Industrial Production was down 0.6% m/m (expected 0.3%; last -0.5%), falling 0.7% yr/yr (expected 0.2%; last -1.8%). October Manufacturing Production was down 0.6% m/m (expected 0.2%; last -1.0%) and was unchanged yr/yr (expected 0.9%; last -0.7%). October trade deficit reached GBP19.0 bln (expected deficit of GBP16.1 bln; last deficit of GBP16.3 bln).
  • France's November CPI was down 0.1% m/m (expected 0.1%; last 0.3%) but up 1.3% yr/yr, as expected (last 1.2%).
  • Spain's November CPI was up 0.2% m/m, as expected (last 0.6%), rising 2.4% yr/yr, as expected (last 1.8%). November Core CPI was up 2.4% yr/yr, as expected (last 2.5%).
• Commodities:
  • WTI Crude: +0.8% to $70.58/bbl
  • Gold: -0.6% to $2692.20/ozt
  • Copper: -0.2% to $4.236/lb
• Currencies:
  • EUR/USD: +0.4% to 1.0509
  • GBP/USD: -0.1% to 1.2660 
  • USD/CNH: +0.1% to 7.2804
  • USD/JPY: +0.6% to 153.47
• Data out Today:
  • 8:30 ET: November Import Prices (prior 0.3%), Import Prices ex-oil (prior 0.2%), Export Prices (prior 0.8%), and Export Prices ex-agriculture (prior 0.6%)