Bond Market Update

Eye on FOMC

• U.S. Treasuries have seen yields drift higher in front of today's FOMC decision. That decision, out at 2:00 p.m. ET along with the Summary of Economic Projections (SEP), is expected to include a 25-basis points rate cut to 4.25-4.50%; however, many think it will come with an indication that the Fed is inclined to hold off on more rate cuts as it assesses economic activity and inflation trends. That is why today's cut is being referred to as a "hawkish cut." In any case, the Fed's decision and its updated SEP, and Fed Chair Powell's tone at his 2:30 p.m. ET press conference, will command the market's attention throughout the trading day. The 8:30 a.m. ET release of housing starts and building permits for November will be a temporary diversion.
• Yield Check:
  • 2-yr: +2 bps to 4.26%
  • 3-yr: +2 bps to 4.24%
  • 5-yr: +3 bps to 4.28%
  • 10-yr: +4 bps to 4.42%
  • 30-yr: +3 bps to 4.61%

• News:
  • Government funding bill includes provision that requires PBMs to fully pass through 100% of drug rebates to health plans, according to The Hill
  • Elon Musk says that the government funding bill should not pass, according to X post
  • OPEC concerned about President-elect Trump's plan to increase domestic oil production, according to Reuters
  • President-elect Trump's transition team is preparing plans to lower EV federal subsidies, according to Bloomberg
  • CFPB aiming to investigate credit card reward programs, according to Washington Post
  • Canada revealed a $900 mln border security plan in order to prevent tariffs from incoming Trump administration, according to The Wall Street Journal
  • Japan reported November trade data that included better-than-expected exports but weaker-than-expected imports, contributing to the prevailing expectation that the BOJ will hold off on raising rates this week
  • The PBOC held a meeting with financial firms to discuss their aggressive trading and to emphasize the need to be aware of relevant risks, according to Bloomberg
  • Bank Indonesia held its benchmark rate steady at 6.00% and Bank of Thailand did, too, keeping its policy rate at 2.25%
  • Eurozone's November CPI -0.3% (expected -0.3%; last 0.3%) and 2.2% yr/yr (expected 2.3%; last 2.0%); Core CPI -0.6% m/m (expected -0.6%; last 0.2%) and 2.7% yr/yr (expected 2.7%; last 2.7%)
• Commodities:
  • WTI crude: +0.7% to $70.58/bbl
  • Gold: +0.1% to $2663.60/ozt
  • Copper: +0.2% to $4.16/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0495
  • GBP/USD: +0.1% to 1.2715
  • USD/CNH: +0.1% to 7.2933
  • USD/JPY: +0.1% to 153.67
• The Day Ahead:
  • 07:00 ET: MBA Mortgage Applications Index (Actual -0.7%; prior 5.4%)
  • 08:30 ET: November Housing Starts (Briefing.com consensus 1347K; prior 1311K) and Building Permits (Briefing.com consensus 1430K; prior 1416K)
  • 08:30 ET: Q3 Current Account Balance (Briefing.com consensus -$283.0B; prior -$266.8B)
  • 10:30 ET: EIA Crude Oil Inventories (prior -1.43M)
  • 14:00 ET: FOMC Rate Decision and Summary of Economic Projections
  • 14:30 ET: Fed Chair Powell press conference