Bond Market Update

European Services PMI Readings Weigh

• U.S. Treasuries are on track for a lower start after Treasury futures retreated during the European session. The market held its ground through the first half of the night while Asian markets reacted to yesterday's brief implementation of martial law in South Korea. There was also a fair share of economic data with final November Services PMI readings from China (51.5) and India (58.4) missing expectations while readings from Japan (50.5) and Australia (50.5) were better than expected. The eurozone's final Services PMI for November (49.5) was a bit better than expected, but it still reflected the first contraction in the sector since January. However, it was good enough to exert pressure on European sovereign debt and U.S. Treasury futures. The U.S. session will also see the release of the final Services PMI (prior 55.0) for November at 9:45 ET, followed by the November ISM Non-Manufacturing Index (Briefing.com consensus 55.5%; prior 56.0%) at 10:00 ET. Also at 10:00 ET, France's Prime Minister Barnier will face a confidence vote that he is likely to lose. Crude oil is little changed after yesterday's rally while the U.S. Dollar Index is up 0.1% at 106.52.
• Yield Check:
  • 2-yr: +3 bps to 4.20%
  • 3-yr: +4 bps to 4.17%
  • 5-yr: +4 bps to 4.15%
  • 10-yr: +5 bps to 4.27%
  • 30-yr: +5 bps to 4.44%

• News:
  • China will hold a Central Economic Work Conference next Wednesday and Thursday, and there is speculation that additional stimulus measures will be announced at that time.
  • Bank of England Governor Bailey repeated that gradual rate cuts are expected to take place next year.
  • European Central Bank policymaker Holzmann said that a rate cut larger than 25 basis points will not happen in December.
  • China's November Caixin Services PMI hit 51.5 (expected 52.5; last 52.0).
  • Japan's November Services PMI hit 50.5 (expected 50.2; last 49.7).
  • India's November Services PMI hit 58.4 (expected 59.2; last 58.5).
  • Hong Kong's November Manufacturing PMI hit 51.2 (last 52.2).
  • Australia's November AIG Construction Index hit -19.0 (last -40.9) and AIG Manufacturing Index hit -17.9 (last -19.7). November Services PMI hit 50.5 (expected 49.6; last 51.0). Q3 GDP expanded 0.3% qtr/qtr (expected 0.5%; last 0.2%), growing 0.8% yr/yr (expected 1.1%; last 1.0%).
  • Eurozone's November Services PMI hit 49.5 (expected 49.2; last 51.6). October PPI was up 0.4% m/m, as expected (last -0.6%) but down 3.2% yr/yr (last -3.4%).
  • Germany's November Services PMI hit 49.3 (expected 49.4; last 51.6).
  • U.K.'s November Services PMI hit 50.8 (expected 50.0; last 52.0).
  • France's November Services PMI hit 46.9 (expected 45.7; last 49.2).
  • Italy's November Services PMI hit 49.2 (expected 51.1; last 52.4).
  • Spain's November Services PMI hit 53.1 (expected 53.6; last 54.9).
• Commodities:
  • WTI Crude: +0.2% to $70.09/bbl
  • Gold: -0.2% to $2662.40/ozt
  • Copper: -0.3% to $4.188/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0488
  • GBP/USD: -0.1% to 1.2662
  • USD/CNH: -0.2% to 7.2831 
  • USD/JPY: +1.1% to 151.17
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 2.8%; prior 6.3%)
  • 8:15 ET: November ADP Employment Change (Briefing.com consensus 170,000; prior 233,000)
  • 9:45 ET: November S&P Global U.S. Services PMI (prior 55.0)
  • 10:00 ET: November ISM Non-Manufacturing Index (Briefing.com consensus 55.5%; prior 56.0%)
  • 10:30 ET: Weekly crude oil inventories (prior -1.84 mln)