Bond Market Update

In Demand

• U.S. Treasuries were in demand on Monday, fortified by safe-haven buying interest and possibly rebalancing activity as stocks languished for the second straight session without a news catalyst to account for the broad-based selling. The buying interest began overnight in the Treasury market, bolstered presumably by foreign participants, many of whom will see their local markets closed Tuesday (or closing early) for New Year's Day on Wednesday. The Treasury market is open for a full day of trading on Tuesday. The bulk of today's gains were logged before the 9:45 a.m. ET release of the December Chicago PMI, which fell to its lowest level (36.9) since May.
• Yield Check:
  • 2-yr: -8 bps to 4.25%
  • 3-yr: -9 bps to 4.28%
  • 5-yr: -9 bps to 4.37%
  • 10-yr: -7 bps to 4.55%
  • 30-yr: -5 bps to 4.76%

• News:
  • Former President Jimmy Carter has passed away at age 100; President Biden declared January 9 as a National Day of Mourning (markets will be closed that day)
  • Treasury Secretary Janet Yellen says debt ceiling will be reached in mid-January. Analysts expect Treasury will exhaust extraordinary measures in July or August, according to Bloomberg
  • President-elect Trump urged Supreme Court to pause ban on TikTok, which goes into effect January 19. Supreme Court will hear case on January 10, according to NBC News
  • Jeju Air Flight 7C2216 veered off the runway and crashed; 179 people reported dead; plane was a Boeing 737-800; South Korea declares a national mourning period for Jeju Air crash until Jan. 4
  • President-elect Trump in interview says he supports H1-B visas for highly skilled immigrant workers, according to New York Post
  • President Biden announces nearly $2.5 billion in security assistance for Ukraine
  • China aiming to lower import tariffs on some recycled copper and aluminum raw materials, according to Reuters
  • Bill Ackman says that he believes there is a credible path for Fannie Mae (FNMA) and Freddie Mac (FMCC) to be removed from conservatorship during President-elect Trump's second term
  • PBOC Gov Pan reiterated that he sees more scope for RRR cuts, according to People's Daily
• Today's data:
  • The December Chicago PMI checked in at a lowly 36.9 (Briefing.com consensus 42.7) versus 40.2 in November. This is the lowest reading since May. The dividing line between expansion and contraction is 50.0, so the December reading connotes an acceleration in the pace of contraction for manufacturing activity in the Chicago Fed region.
  • The November Pending Home Sales index increased 2.2% month-over-month (Briefing.com consensus 0.9%) versus a downwardly revised 1.8% (from 2.0%) for October.
• Commodities:
  • WTI crude: +0.8% to $71.07/bbl
  • Gold: -1.3% to $2618.60/ozt
  • Copper: -0.7% to $4.10/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0400
  • GBP/USD: -0.3% to 1.2541
  • USD/CNH: +0.2% to 7.3151
  • USD/JPY: -0.4% to 157.09
• The Day Ahead:
  • 09:00 ET: October FHFA Housing Price index (prior 0.7%)
  • 09:00 ET: October S&P Case-Shiller Home Price index (Briefing.com consensus 4.2%; prior 4.6%)