Bond Market Update

Lower Start Ahead

• U.S. Treasuries are on track for a lower start with shorter tenors expected to show some relative weakness after underperforming last week. Treasury futures slipped in early evening action, facing some more pressure during the Asian session. The market bounced briefly as the focus turned to Europe, before a return toward overnight lows. The weakness in Treasuries has been accompanied by dollar strength against other currencies after President-elect Trump threatened BRICS countries with a 100% tariff if they seek alternative currencies to the greenback. Continued demand for Chinese debt pressured China's 10-yr yield to a fresh record low of 1.975% before some backtracking to 2.000%. Final November Manufacturing PMI readings were mixed with China's Manufacturing PMI showing a slight acceleration in activity (to 50.3 from 50.1) while Non-Manufacturing PMI decelerated to a standstill at 50.0. Japan's Manufacturing PMI (49.0) remained in contraction for the sixth consecutive month while the eurozone's reading dropped to 45.2 from 46.0 in the preliminary reading. The U.S. session will see the release of the final S&P Global U.S. Manufacturing PMI (prior 48.5) for November at 9:45 ET, followed by the November ISM Manufacturing Index (Briefing.com consensus 47.6%; prior 46.5%) at 10:00 ET. Crude oil is seeking its first gain in five days while the U.S. Dollar Index is up 0.6% at 106.32.
• Yield Check:
  • 2-yr: +3 bps to 4.19%
  • 3-yr: +3 bps to 4.13%
  • 5-yr: +3 bps to 4.09%
  • 10-yr: +2 bps to 4.20%
  • 30-yr: UNCH at 4.37%

• News:
  • There is a growing likelihood that Marine Le Pen's National Rally will support a vote of no-confidence in Prime Minister Barnier if he continues refusing to negotiate the budget for 2025.
  • Standard & Poor's affirmed France's AA- rating with a Stable outlook.
  • China's November Manufacturing PMI hit 50.3 (expected 50.2; last 50.1) and Non-Manufacturing PMI hit 50.0 (expected 50.4; last 50.2). November Caixin Manufacturing PMI hit 51.5 (expected 50.6; last 50.3).
  • Japan's November Manufacturing PMI hit 49.0, as expected (last 49.2).
  • South Korea's November trade surplus reached $5.61 bln (last surplus of $3.15 bln) as imports fell 2.4% yr/yr (last 1.7%) and exports rose 1.4% yr/yr (last 4.6%). November Manufacturing PMI hit 50.6 (last 48.3).
  • India's November Manufacturing PMI hit 56.5 (expected 57.3; last 57.5).
  • Australia's November Manufacturing PMI hit 49.4 (last 49.4) and MI Inflation Gauge was up 0.2% m/m (last 0.3%). October Building Approvals rose 4.2% m/m (expected 1.2%; last 5.8%), increasing 12.7% yr/yr (last 18.1%). October Retail Sales rose 0.6% m/m (expected 0.4%; last 0.1%). October Private House Approvals were down 5.2% m/m (last 2.2%). Q3 Business Inventories fell 0.9% qtr/qtr (expected -0.2%; last 0.5%).
  • New Zealand's October Building Consents were down 5.2% m/m (last 2.4%).
  • Eurozone's November Manufacturing PMI hit 45.2, as expected (last 46.0). October Unemployment Rate remained at 6.3%, as expected.
  • Germany's November Manufacturing PMI hit 43.0 (expected 43.2; last 43.0).
  • U.K.'s November Nationwide HPI was up 1.2% m/m (expected 0.2%; last 0.1%), rising 3.7% yr/yr (expected 2.4%; last 2.4%). November Manufacturing PMI hit 48.0 (expected 48.6; last 49.9).
  • France's November Manufacturing PMI hit 43.1 (expected 43.2; last 44.5).
  • Italy's November Manufacturing PMI hit 44.5 (expected 46.1; last 46.9). October Unemployment Rate fell to 5.8% from 6.0% (expected 6.1%). Q3 GDP was unchanged, as expected (last 0.0%), rising 0.4% yr/yr, as expected (last 0.4%).
  • Spain's November Manufacturing PMI hit 53.1 (expected 53.9; last 54.5).
  • Swiss October Retail Sales rose 1.4% yr/yr (expected 2.6%; last 1.8%). November procure.ch PMI hit 48.5 (expected 49.6; last 49.9).
• Commodities:
  • WTI Crude: +1.1% to $68.74/bbl
  • Gold: -0.7% to $2663.40/ozt
  • Copper: -0.4% to $4.126/lb
• Currencies:
  • EUR/USD: -0.7% to 1.0501
  • GBP/USD: -0.5% to 1.2668
  • USD/CNH: +0.6% to 7.2880
  • USD/JPY: +0.3% to 150.12
• Data out Today:
  • 9:45 ET: Final November S&P Global U.S. Manufacturing PMI (prior 48.5)
  • 10:00 ET: October Construction Spending (Briefing.com consensus 0.1%; prior 0.1%) and November ISM Manufacturing Index (Briefing.com consensus 47.6%; prior 46.5%)