Bond Market Update

Short End Lags Ahead of November Jobs Report

• U.S. Treasuries finished Thursday on a mixed note with the long bond recording a modest gain while the short end retreated ahead of tomorrow's release of the Employment Situation report for November (Briefing.com consensus 200,000; prior 12,000), which is expected to show a rebound in hiring after weather-impacted October. The trading day started with losses across the curve, but longer tenors began showing resilience shortly after the start while the short end resisted, though the 2-yr note also climbed off its morning low as the day went on. The outperformance in longer tenors kept the 10-yr yield near its 50-day moving average (4.187%) and just above this week's low (4.165%). Crude oil extended yesterday's loss while the U.S. Dollar Index fell 0.6% to 105.73, returning to last week's low.
• Yield Check:
  • 2-yr: +3 bps to 4.15%
  • 3-yr: +2 bps to 4.10%
  • 5-yr: +1 bp to 4.08%
  • 10-yr: UNCH at 4.18%
  • 30-yr: -1 bp to 4.34%

• News:
  • France's Prime Minister Barnier resigned today, but he will remain interim prime minister until President Macron names a successor. 
  • European Central Bank policymaker Kazaks said that a rate cut should be made next week.
  • The Bank of England's Decision Maker Panel raised its year-ahead CPI forecast to 2.7% from 2.5% while the three-year outlook remained at 2.6%.
  • Italy's Stats Agency lowered its domestic growth forecast for 2024 to 0.5% from 1.0% while the outlook for 2025 was reduced to 0.8% from 1.1%. 
  • Expectations for a December rate hike from the Bank of Japan receded after BoJ policymaker Nakamura said that inflation could fall below the 2.0% target from fiscal 2025 and that he is skeptical about the sustainability of wage growth
  • South Korea's President Yoon is likely to face an impeachment vote this weekend. Meanwhile, South Korea's metal workers union threatened to go on strike on Wednesday until President Yoon resigns from office.
  • South Korea's Q3 GDP was up 0.1% qtr/qtr (expected 0.5%; last 0.1%), rising 1.5% yr/yr, as expected (last 1.5%).
  • Singapore's October Retail Sales rose 0.1% m/m (last 0.4%), increasing 2.2% yr/yr (last 1.9%). · Australia's October trade surplus reached AUD5.95 bln (expected surplus of AUD4.53 bln; last surplus of AUD4.53 bln) as imports ticked up 0.1% m/m (last -2.8%) and exports rose 3.6% m/m (last -4.7%).
  • Eurozone's October Retail Sales were down 0.5% m/m (expected -0.4%; last 0.5%) but up 1.9% yr/yr (expected 1.7%; last 3.0%).
  • Germany's October Factory Orders fell 1.5% m/m (expected -2.0%; last 4.2%).
  • U.K.'s November Construction PMI hit 55.2 (expected 53.5; last 54.3).
  • France's October Industrial Production was down 0.1% m/m (expected 0.3%; last -0.8%).
  • Spain's October Industrial Production rose 1.9% yr/yr (expected 0.3%; last 1.1%).
  • Swiss November Unemployment Rate remained at 2.6% (expected 2.7%).
• Today's Data:
  • Initial jobless claims for the week ending November 30 increased by 9,000 to 224,000 (Briefing.com consensus 213,000) and continuing jobless claims for the week ending November 23 decreased by 25,000 to 1.871 million.
    • The key takeaway from the report is that the totality of the report isn't signaling any major changes with respect to labor market trends, which have connoted some softening but no real breakage on the employment front.
  • The October trade deficit narrowed to $73.8 billion (Briefing.com consensus -$75.1 billion) from an upwardly revised $83.8 billion (from -$84.4 billion) in September. The improvement results from exports being $4.3 billion less than September exports and imports being $14.3 billion less than September imports.
    • The key takeaway from the report is that it reflects overall weakness in global trade activity in October.
  • Weekly natural gas inventories decreased by 30 bcf after decreasing by 2 bcf a week ago.
• Commodities:
  • WTI crude: -0.4% to $68.30/bbl
  • Gold: -1.0% to $2648.10/ozt 
  • Copper: -0.5% to $4.18/lb
• Currencies:
  • EUR/USD: +0.7% to 1.0585 
  • GBP/USD: +0.4% to 1.2755
  • USD/CNH: -0.2% to 7.2643
  • USD/JPY: -0.3% to 150.07
• The Day Ahead:
  • 8:30 ET: November Nonfarm Payrolls (Briefing.com consensus 200,000; prior 12,000), Nonfarm Private Payrolls (Briefing.com consensus 200,000; prior -28,000), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.4%), Unemployment Rate (Briefing.com consensus 4.2%; prior 4.1%), and Average Workweek (Briefing.com consensus 34.3; prior 34.3)
  • 10:00 ET: Preliminary December University of Michigan Consumer Sentiment (Briefing.com consensus 73.5; prior 71.8)
  • 15:00 ET: October Consumer Credit (Briefing.com consensus $10.5 bln; prior $6.0 bln)