Bond Market Update

Finding a Bid

• U.S. Treasuries are finding a bid after a tough showing last week that saw yields across the curve jump by a sizable margin following some not-so-friendly November inflation data. Some weaker-than-expected retail sales data out of China and a Moody's downgrade of France from Aa3 to Aa2 supported some of the overnight interest. The action this week will be spearheaded by economic data and central bank policy decisions. The Federal Reserve, Bank of England, Norges Bank, Riksbank, Bank of Japan, and People's Bank of China will all be making policy decisions this week. The market widely expects the Fed to cut the target range for the fed funds rate by another 25 basis points this week to 4.25-4.50%.
• Yield Check:
  • 2-yr: -2 bps to 4.22%
  • 3-yr: -2 bps to 4.20%
  • 5-yr: -3 bps to 4.22%
  • 10-yr: -3 bps to 4.37%
  • 30-yr: -4 bps to 4.58%

• News:
  • ECB President Lagarde talking up the likelihood of more rate cuts
  • Central bank policy decisions this week from Federal Reserve, Bank of England, Norges Bank, Riksbank, Bank of Japan, and People's Bank of China
  • South Korean President Yoon Suk Yeol was suspended from office following impeachment vote. Prime Minister Han Duck-soo will become interim leader, according to New York Times
  • Moody's downgraded France's credit rating from Aa3 to Aa2 on concerns over deficit and political issues
  • Chinese regulators, though, continued to talk up 2025 fiscal and monetary policy initiatives designed to increase domestic consumption
  • German parliament to hold confidence vote on Chancellor Scholz that is expected to fail and trigger a snap election in February 2025
  • Lawmakers have disagreements over government funding bill ahead of Friday deadline, according to Politico
  • Appeals Court denied TikTok's request to pause January 19th ban, according to Bloomberg
  • President-elect Trump considering privatizing the USPS, which would require congressional approval, according to Washington Post
  • Office property values are impacting regional banks, according to Bloomberg
  • President-elect Trump suggested creating bitcoin reserve, according to Reuters; Bitcoin tops $106,000
  • Eurozone countries report weak preliminary December Manufacturing PMI readings; Services PMIs generally better than expected
  • China's November Retail Sales +3.0% yr/yr (+4.6% expected; last +4.8%); November Industrial Production +5.4% yr/yr (+5.4% expected; last +5.3%; Fixed Asset Investment +3.3% yr/yr (+3.5% expected; last +3.4%)
• Commodities:
  • WTI crude: -1.0% to $70.60/bbl
  • Gold: +0.1% to $2679.70/ozt
  • Copper: -0.2% to $4.19/lb
• Currencies:
  • EUR/USD: flat at 1.0497
  • GBP/USD: +0.3% to 1.2647
  • USD/CNH: +0.2% to 7.2909
  • USD/JPY: +0.3% to 154.06
• The Day Ahead:
  • 08:30 ET: December Empire State Manufacturing Survey (prior 31.2
  • 09:45 ET: Flash December S&P Global U.S. Manufacturing PMI (prior 49.7)
  • 09:45 ET: Flash December S&P Global U.S. Services PMI (prior 56.1)