Bond Market Update

Curve Steepens

• U.S. Treasuries had a roller-coaster session influenced by thin trading conditions. The 10-yr note yield hit 4.61% in overnight trading, fell back to 4.58%, and then settled at 4.62% in a curve-steepening trade that saw the 2s10s spread widen to 29 basis points from 25 basis points at Thursday's settlement. Stocks saw some sharp losses, yet there wasn't much flight-to-safety interest in Treasuries as higher yields drew some blame for the weakness in the richly-valued stock market. Yields across the curve settle higher versus the prior week. The U.S. Dollar Index was down 0.1% to 108.04.
• Yield Check:
  • 2-yr: unch at 4.33% (+1 bp for the week)
  • 3-yr: +2 bps to 4.37% (+5 bps for the week)
  • 5-yr: +3 bps to 4.46% (+7 bps for the week)
  • 10-yr: +4 bps to 4.62% (+9 bps for the week)
  • 30-yr: +5 bps to 4.81% (+9 bps for the week)

• News:
  • Russian President Putin rejects calls for immediate ceasefire, but says he is ready for talks with President-elect Trump on long peace agreement, according to Bloomberg
  • House Freedom Caucus Chair Andy Harris is questioning if the current House leadership is best to advance President-elect Trump's agenda, according to Politico
  • South Korea's legislature impeached Acting President Han Duck-soo (EWY), according to The Wall Street Journal
  • BOJ's Summary of Opinions from its December meeting conveyed a willingness to be patient before raising rates again
  • Japan's Cabinet approved a record JPY115.5 trillion budget for FY25/26
  • Japan's Tokyo CPI 3.0% yr/yr (last 2.6%) and Core CPI 2.4% yr/yr (expected 2.5%; last 2.2%)
  • Spain's November Retail Sales 1.0% yr/yr (expected 2.8%; last 3.4%)
• Today's data:
  • The November Advance International Trade in Goods deficit showed a widening to $102.9 billion from an upwardly revised $98.3 billion (from -$99.1 billion) in October. Exports were $7.4 billion more than October exports, but imports were $12.0 billion more than October imports.
  • November Advance Retail Inventories were up 0.3% versus an upwardly revised 0.2% (from 0.1%) in October
  • November Advance Wholesale Inventories were down 0.2% versus a downwardly revised 0.1% increase (from 0.2%) in October.
• Commodities:
  • WTI crude: +1.3% to $70.53/bbl
  • Gold: -0.8% to $2633.20/ozt
  • Copper: unch at $4.13/lb
• Currencies:
  • EUR/USD: flat at 1.0425
  • GBP/USD: +0.4% to 1.2574
  • USD/CNH: flat at 7.3010
  • USD/JPY: flat at 157.94
• The Week Ahead:
  • Monday: December Chicago PMI (prior 40.2) at 9:45 a.m. ET; November Pending Home Sales (prior 2.0%) at 10:00 a.m. ET
  • Tuesday: October FHFA Housing Price Index at 9:00 a.m. ET; October S&P Case-Shiller Home Price Index (prior 4.6%) at 10:00 a.m. ET
  • Wednesday: Markets closed for New Year's Day
  • Thursday: Weekly Initial Jobless Claims (prior 219K) and Continuing Jobless Claims (prior 1910K) at 8:30 a.m. ET; December S&P Global U.S. Manufacturing PMI - FInal (prior 49.7) at 9:45 a.m. ET; November Construction Spending (prior 0.4%) at 10:00 a.m. ET; EIA Crude Oil Inventories (prior -4.237M)
  • Friday: December ISM Manufacturing Index (prior 48.4%) at 10:00 a.m. ET; EIA Natural Gas Inventories (-93 bcf) at 10:30 a.m. ET