Bond Market Update

Getting Some Help

• Treasuries have been helped today by a batch of generally weaker than expected economic data. The retail sales report was the featured report, and while it was stronger than expected in terms of total sales (+0.7%), it was weaker than expected excluding autos (+0.2%). Since the data are not adjusted for price changes, the latter seemed to imply that the sales gain was driven primarily by higher prices than by increased volume/demand.
• Today's data didn't disrupt the prevailing expectation that the FOMC will agree tomorrow to cut the target range for the fed funds rate by another 25 basis points to 4.25-4.50%. That probability stands at 95.2% versus 98.2% yesterday, according to the CME FedWatch Tool. Similarly, the market still expects the FOMC to sit tight at the January FOMC meeting, showing just a 16.3% probability of a rate cut, versus 14.7% yesterday, according to the CME FedWatch Tool.
• Yield check:
  • 2-yr: +1 bp to 4.25%
  • 3-yr: unch at 4.22%
  • 5-yr: unch at 4.25%
  • 10-yr: -2 bps to 4.38%
  • 30-yr: -3 bps to 4.58%