Bond Market Update

Short End Leads

• U.S. Treasuries are on track for a higher start with shorter tenors set to continue yesterday's outperformance. Treasury futures spent the night in a steady rise, reaching their best levels in recent trade. The odds of a U.S. government shutdown increased after The House of Representatives voted down a slimmed down version of a funding bill. Overseas, the People's Bank of China left its one-year and five-year loan prime rates at 3.10% and 3.60%, respectively, while Bank of Japan Governor Ueda made some dovish-sounding comments regarding the timing of the next rate hike. The U.S. data slate will feature the release of the Personal Income/Outlays report for November, which will contribute to the market's rate cut expectations for next year. Crude oil is back below its 50-day moving average (69.82) while the U.S. Dollar Index is down 0.3% at 108.09.
• Yield Check:
  • 2-yr: -4 bps to 4.28%
  • 3-yr: -4 bps to 4.30%
  • 5-yr: -5 bps to 4.38%
  • 10-yr: -3 bps to 4.54%
  • 30-yr: -1 bp to 4.73%

• News:
  • Bank of Japan Governor Ueda said that he wants to see "one more notch" in the rate hike cycle, adding that there might not be enough supportive data to make that decision at the January meeting.
  • France's Prime Minister Bayrou said that a new cabinet will be announced before Christmas Day and a budget should be ready by the middle of February. Meanwhile, European Central Bank policymaker Villeroy de Galhau said that the new French government must reduce the deficit next year.
  • Germany's President Steinmeier is expected to dissolve parliament next Friday after Chancellor Olaf Scholz lost a confidence vote.
  • Japan's November National CPI was up 0.6% m/m (last 0.4%), rising 2.9% yr/yr (last 2.3%). November National Core CPI was up 2.7% yr/yr (expected 2.6%; last 2.3%).
  • South Korea's November PPI was up 0.1% m/m (last -0.1%), rising 1.4% yr/yr (last 1.0%).
  • Hong Kong's November CPI was unchanged m/m (last 0.2%), rising 1.4% yr/yr (expected 1.5%; last 1.4%).
  • Australia's November Private Sector Credit was up 0.5% m/m, as expected (last 0.6%) and November Housing Credit was also up 0.5% m/m (last 0.5%).
  • New Zealand's November trade deficit reached NZD437 mln (expected deficit of NZD1.95 bln; last deficit of NZD1.66 bln). November Credit Card Spending was down 3.2% yr/yr (last 0.3%).
  • Germany's November PPI was up 0.5% m/m (expected 0.3%; last 0.2%), rising 0.1% yr/yr (expected -0.3%; last -1.1%).
  • U.K.'s November Retail Sales rose 0.2% m/m (expected 0.5%; last -0.7%), increasing 0.5% yr/yr (expected 0.8%; last 2.0%). November Core Retail Sales were up 0.3% m/m (expected 0.0%; last -0.9%), rising 0.1% yr/yr (expected 0.7%; last 1.6%). November Public Sector Net Borrowing reached GBP11.25 bln (expected GBP15.50 bln; last GBP18.22 bln). December CBIN Distributive Trades Survey rose to -15 from -18 (expected -9).
  • France's November PPI was up 3.2% m/m (last 0.9%) but down 5.2% yr/yr (last -6.0%).
  • Italy's December Business Confidence fell to 85.8 from 86.5 (expected 86.0) and Consumer Confidence dipped to 96.3 from 96.6 (expected 97.0). October Industrial Sales were up 0.5% m/m (last -0.3%) but down 5.3% yr/yr (last -5.7%). November PPI was up 1.2% m/m (last 0.7%) but down 0.5% yr/yr (last -2.8%).
• Commodities:
  • WTI Crude: -0.6% to $68.98/bbl
  • Gold: +0.4% to $2618.10/ozt
  • Copper: +0.3% to $4.09/lb
• Currencies:
  • EUR/USD: +0.3% to 1.0390
  • GBP/USD: +0.1% to 1.2509
  • USD/CNH: -0.1% to 7.3023
  • USD/JPY: -0.4% to 156.76
• Data out Today:
  • 8:30 ET: November Personal Income (Briefing.com consensus 0.4%: prior 0.6%), Personal Spending (Briefing.com consensus 0.5%; prior 0.4%), PCE Prices (Briefing.com consensus 0.2%; prior 0.2%), and Core PCE Prices (Briefing.com consensus 0.2%; prior 0.3%)
  • 10:00 ET: Final December University of Michigan Consumer Sentiment (Briefing.com consensus 74.2; prior 74.0)