Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a modestly lower start after a subdued night in global markets. The new week began with news that a weekend government shutdown was avoided after Congress passed a three-month funding bill on Friday night. Treasury futures started the week in flat fashion, spending the bulk of the night in a sideways range before slipping to lows shortly after the start of the European session. Continued demand for Chinese debt briefly sent yields on most tenors to fresh record lows before a pullback, but overall activity was on the light side during the Asian session, with the trend continuing in Europe, where markets will be closed on Wednesday and Thursday while tomorrow will see some early closures, though Germany and Italy will be closed altogether. Economic data during the U.S. session will be limited to the 10:00 ET release of Consumer Confidence for December (Briefing.com consensus 113.5; prior 111.7) and the U.S. Treasury will sell $69 bln in 2-yr notes at 13:00 ET. Crude oil holds a modest loss while the U.S. Dollar Index is up 0.6% at 108.22.
• Yield Check:
  • 2-yr: +1 bp to 4.32%
  • 3-yr: +1 bp to 4.33%
  • 5-yr: +2 bps to 4.40%
  • 10-yr: +3 bps to 4.55%
  • 30-yr: +3 bps to 4.75%

• News:
  • Japan's Cabinet office maintained its overall economic assessment in the report for December.
  • Executives from Nissan and Honda met with Japanese officials to discuss their merger plans.
  • China's GAC Motor expects to report a 20% yr/yr decrease in vehicle sales for 2024 but it expects 15% yr/yr growth in 2025.
  • European Central Bank President Lagarde said that the time is approaching when it could be declared that inflation has sustainably returned to the 2.0% target while policymakers Vujcic and Makhlouf spoke in favor of additional rate cuts in 2025.
  • Singapore's November CPI was unchanged m/m (last -0.3%), rising 1.6% yr/yr (expected 1.8%; last 1.4%). November Core CPI was up 1.9% yr/yr (expected 2.1%; last 2.1%).
  • Germany's November Import Price Index was up 0.9% m/m (expected 0.5%; last 0.6%), rising 0.6% yr/yr (last -0.8%).
  • U.K.'s Q3 GDP was unchanged qtr/qtr (expected 0.1%; last 0.4%), rising 0.9% yr/yr (expected 1.0%; last 0.7%). Q3 Business Investment was up 1.9% qtr/qtr (expected 1.2%; last 1.8%), rising 5.8% yr/yr (expected 4.5%; last 1.4%). Q3 Current Account deficit reached GBP18.1 bln (expected deficit of GBP22.9 bln; last deficit of GBP24.0 bln).
  • Italy's November non-EU trade surplus reached EUR5.91 bln (last surplus of EUR5.81 bln).
  • Spain's Q3 GDP was up 0.8% qtr/qtr, as expected (last 0.8%), expanding 3.3% yr/yr (expected 3.4%; last 3.1%).
  • Swiss December ZEW Expectations fell to -20.0 from -12.4.
• Commodities:
  • WTI Crude: -0.5% to $69.12/bbl
  • Gold: -0.6% to $2628.60/ozt
  • Copper: UNCH at $4.10/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0394
  • GBP/USD: -0.3% to 1.2523
  • USD/CNH: +0.2% to 7.3061
  • USD/JPY: +0.5% to 157.14
• Data out Today:
  • 10:00 ET: December Consumer Confidence (Briefing.com consensus 113.5; prior 111.7)
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results