Bond Market Update

Longer Tenors Extend Post-FOMC Losses

• U.S. Treasuries are on track for a mixed start after yesterday's volatility with longer tenors expected to show early weakness while the short end is set for a higher open. Longer-dated Treasury futures spent the bulk of the night in a sideways range, slipping to lows once the focus turned to action in Europe while the front end inched higher throughout the night that was busy on the central bank front. The Bank of Japan voted 8-1 to maintain its policy rate at 0.25% against some expectations for a 25-basis point increase while the Hong Kong Monetary Authority followed yesterday's rate cut by the FOMC with a 25-basis point decrease of its own (to 4.75%). In Europe, the Bank of England and Norway's Norges Bank left their respective policy rates at 4.75% and 4.50% while Sweden's Riksbank announced a 25-basis point cut to 2.50%. The U.S. session will feature the release of several economic reports, including the third estimate of Q3 GDP (Briefing.com consensus 2.8%), followed by November Existing Home Sales (Briefing.com consensus 4.10 mln; prior 3.96 mln) at 10:00 ET. Crude oil holds a modest loss, hovering just above its 50-day moving average (69.97) while the U.S. Dollar Index is down 0.1% at 107.95.
• Yield Check:
  • 2-yr: -3 bps to 4.32%
  • 3-yr: -1 bp to 4.33%
  • 5-yr: +2 bps to 4.40%
  • 10-yr: +4 bps to 4.53%
  • 30-yr: +5 bps to 4.71%

• News:
  • Mortgage rates in China increased for the first time since 2021 due to falling margins.
  • The People's Bank of China could alter its loan prime rate tomorrow.
  • Sweden's Riksbank lowered its policy rate by 25 basis points to 2.50%, lowered its 2025 growth forecast to 1.8% from 1.9%, and hinted at another rate cut during the first half of next year.
  • Norway's Norges Bank left its policy rate at 4.50% and raised its domestic growth forecasts for 2025 (to 1.1% from 1.4%) and 2026 (to 1.4% from 1.3%) while the CPI outlook for 2025 was reduced to 2.7% from 3.0% and the forecast for 2026 was lowered to 2.7% from 2.8%.
  • Australia's December MI Inflation Expectations increased to 4.2% from 3.8%.
  • New Zealand's Q3 GDP contracted 1.0% qtr/qtr (expected -0.2%; last -1.1%), decreasing 1.5% yr/yr (expected -0.4%; last -0.5%). New Zealand's December ANZ Business Confidence fell to 62.3 from 64.9.
  • Eurozone's October Current Account surplus reached EUR25.8 bln (expected surplus of EUR33.5 bln; last surplus of EUR38.8 bln).
  • Germany's January GfK Consumer Climate rose to -21.3 from -23.1 (expected -22.6).
  • France's December Business Survey remained at 97 (expected 96).
  • Swiss November trade surplus reached CHF5.424 bln (expected CHF6.200 bln; last CHF8.025 bln).
  • Spain's October trade deficit reached EUR3.93 bln (last deficit of EUR3.30 bln). November Consumer Confidence rose to 80.6 from 79.6.
• Commodities:
  • WTI Crude: -0.2% to $70.42/bbl
  • Gold: -1.2% to $2621.60/ozt
  • Copper: -1.7% to $4.088/lb
• Currencies:
  • EUR/USD: +0.4% to 1.0391
  • GBP/USD: +0.3% to 1.2615
  • USD/CNH: -0.1% to 7.3126
  • USD/JPY: +1.4% to 156.94
• Data out Today:
  • 8:30 ET: Q3 GDP -- third estimate (Briefing.com consensus 2.8%; prior 2.8%), Q3 GDP Deflator -- third estimate (Briefing.com consensus 1.9%; prior 1.9%), weekly Initial Claims (Briefing.com consensus 237,000; prior 242,000), Continuing Claims (prior 1.886 mln), and December Philadelphia Fed Survey (Briefing.com consensus 3.0; prior -5.5)
  • 10:00 ET: November Existing Home Sales (Briefing.com consensus 4.10 mln; prior 3.96 mln) and November Leading Indicators (Briefing.com consensus -0.1%; prior -0.4%)
  • 10:30 ET: Weekly natural gas inventories (prior -190 bcf)
  • 16:00 ET: October Net Long-Term TIC Flows (prior $216.1 bln)