Bond Market Update

Playing Defense

• U.S. Treasuries were on the defensive in overnight trading, sending yields higher across the board in front of the 8:30 a.m. ET release of the November Retail Sales report. The 10-yr note yield is again tracking toward 4.50%, up 25 basis points for the month to 4.43% with inflation/deficit concerns continuing to fester. Also, market participants are talking about the possibility of a "hawkish cut" by the Fed on Wednesday, which is to say they are expecting Fed Chair Powell to signal a disposition to hold off on further rate cuts given the resilient U.S. economy and sticky inflation above the Fed's 2.0% target. Today's session will also include a $13 billion 20-yr bond reopening with results at 1:00 p.m. ET. EUR/USD -0.1% to 1.0498.
• Yield Check:
  • 2-yr: +4 bps to 4.28%
  • 3-yr: +4 bps to 4.26%
  • 5-yr: +4 bps to 4.29%
  • 10-yr: +3 bps to 4.43%
  • 30-yr: +2 bps to 4.63%

• News:
  • Lawmakers still negotiating government funding details ahead of Friday's deadline amid disagreements over farm aid, according to Washington Post
  • China is going to target a 2025 budget deficit that is a record 4.0% of GDP to help preserve its growth target of 'around 5.0%,' according to Reuters
  • Bank of England rate cut expectations getting dialed back after a report showing stronger than expected employment and earnings data for November
  • German Chancellor Scholz lost the confidence vote, as expected, setting stage for a snap election in February
  • Soaring demand for gold drove a record trade deficit for India, according to Bloomberg
  • Germany's Ifo Business Climate Index hit its lowest level (84.7) since October 2022
  • The Bank of France cut its 2025 GDP growth forecast from 1.2% to 0.9% while the Swiss cut their 2025 growth forecast from 1.6% to 1.5%
• Commodities:
  • WTI crude: -1.3% to $69.82/bbl
  • Gold: -0.4% to $2658.20/ozt
  • Copper: -1.2% to $4.14/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0498
  • GBP/USD: +0.2% to 1.2705
  • USD/CNH: -0.1% to 7.2879
  • USD/JPY: -0.2% to 153.85
• The Day Ahead:
  • 08:30 ET: November Retail Sales (Briefing.com consensus 0.5%; prior 0.4%) and Retail Sales, Ex-Auto (Briefing.com consensus 0.4%; prior 0.1%)
  • 08:30 ET: November Industrial Production (Briefing.com consensus 0.3%; prior -0.3%) and Capacity Utilization (Briefing.com consensus 77.3%; prior 77.1%)
  • 10:00 ET: October Business Inventories (Briefing.com consensus 0.2%; prior 0.1%)
  • 10:00 ET: December NAHB Housing Market Index (Briefing.com consensus 47; prior 46)
  • 13:00 ET: $13 billion 20-yr bond reopening