Bond Market Update

Long End Remains Behind

• Longer-dated Treasuries have spent the first couple hours of action in a steady retreat, making for a continuation of their overnight weakness, while the short end has held up much better, keeping the 2-yr note near its starting level, perhaps with help from the uncertainty related to the potential for a government shutdown. Economic data released this morning was largely supportive of a more hawkish Fed, as Q3 GDP was revised up to 3.1% from 2.8% in the third estimate while weekly initial claims showed a sizable decrease (to 220,000 from 242,000). In addition, Existing Home Sales (4.15 mln; Briefing.com consensus 4.10 mln) exceeded November expectations and the Leading Index (0.3%; Briefing.com consensus -0.1%) showed an unexpected increase in November. The only blemish came from the December Philadelphia Fed Survey (-16.4; Briefing.com consensus 3.0; prior -5.5), which showed that manufacturing in the Philadelphia Fed region contracted at a faster pace than what was seen in the November report. Equities are off to a higher start, looking to recover some of yesterday's losses with the Nasdaq (+1.0%) outperforming the S&P 500 (+0.7%).
• Yield Check:
  • 2-yr: -4 bps to 4.31%
  • 3-yr: -1 bp to 4.33%
  • 5-yr: +2 bps to 4.40%
  • 10-yr: +6 bps to 4.56%
  • 30-yr: +8 bps to 4.74%