Bond Market Update

Treasuries Slip From Multi-week Highs

• U.S. Treasuries began the week with losses across the curve, lifting yields off their lowest levels in at least five weeks. The trading day started with losses that were paced by longer tenors after a busy start to the week on the international news front. China loosened its monetary policy stance for the first time in 14 years ahead of a conference that could include additional stimulus news, Syria's President Assad was ousted by a group led by a former Al Qaeda operative, and there was hope that France will avoid prolonged political drama as President Macron seeks a caretaker prime minister. In the U.S., President-elect Trump appeared in a TV interview, reaffirming his intention to implement the agenda that he campaigned on. Treasuries made an early bounce attempt, but found resistance well before returning to Friday's closing levels during the first hour of action. The rest of the session saw a slow drift to fresh lows, but the market found support before the 10-yr yield climbed above its 50-day moving average (4.203%). There was no top-tier data influencing today's action, but the next few days will bring three Treasury auctions and the CPI (Briefing.com consensus 0.3%: prior 0.2%)/PPI (Briefing.com consensus 0.3%: prior 0.2%) reports for November. Crude oil recovered the bulk of its loss from Friday with help from Syria-related news while the U.S. Dollar Index rose 0.1% to 106.16 after bouncing off its lowest level in nearly a month.
• Yield Check:
  • 2-yr: +3 bps to 4.13%
  • 3-yr: +3 bps to 4.09%
  • 5-yr: +4 bps to 4.07%
  • 10-yr: +5 bps to 4.20%
  • 30-yr: +6 bps to 4.39%

• News:
  • President-elect Trump said that he has no plans to force Fed Chairman Powell out of office. He also reiterated his aim to extend tax cuts during a weekend interview with Meet the Press.
  • The New York Fed released its November Survey of Consumer Expectations, showing ten-basis point upticks in inflation expectations for the year ahead (3.0%), three years ahead (2.6%), and five years ahead (2.9%). The survey also showed that expectations for a better financial situation a year from now have risen to a level not seen since February 2020.
  • The Atlanta Fed's GDPNow forecast for Q4 GDP was left unrevised at 3.3% in the latest update.
  • French President Macron met with political leaders today with an aim of naming a caretaker prime minister in the coming days.
  • China altered its monetary stance to "moderately loose" from "prudent."
  • Fitch lowered its 2025 growth forecast for China to 4.3% from 4.5% and reduced the outlook for 2026 to 4.0% from 4.3%.
  • South Korea's President Yoon survived a weekend impeachment vote but was banned from leaving his country.
  • Nikkei speculated that the Bank of Japan may forego a rate hike next week in favor of an increase in January. 
  • China's November CPI was down 0.6% m/m (expected -0.4%; last -0.3%) but up 0.2% yr/yr (expected 0.5%; last 0.3%). November PPI was down 2.5% yr/yr (expected -2.8%; last -2.9%).
  • Japan's Q3 GDP expanded 0.3% qtr/qtr (expected 0.2%; last 0.5%); Q3 GDP Price Index was up 2.4% yr/yr (expected 2.5%; last 3.2%), Q3 GDP Private Consumption rose 0.7% qtr/qtr (expected 0.9%; last 0.6%), and Q3 GDP Capital Expenditure was down 0.1% qtr/qtr (expected -0.2%; last 1.1%). October Current Account reached JPY2.41 trln (expected JPY2.28 trln; last JPY1.27 trln). November Bank Lending was up 3.0% yr/yr (expected 2.6%; last 2.6%) and November Economy Watchers Current Index hit 49.4 (expected 47.3; last 47.5).
  • Australia's October Building Approvals rose 4.2% m/m, as expected (last 5.8%) and Private House Approvals were down 5.2% m/m, as expected (last 4.1%).
  • Singapore's Q3 Unemployment Rate fell to 1.9% from 2.0%.
  • Eurozone's December Sentix Investor Confidence fell to -17.5 from -12.8 (expected -12.4).
  • Swiss November SECO Consumer Climate fell to -37 from -27 (expected -38).
• Today's Data:
  • Wholesale Inventories increased by 0.2% in October (Briefing.com consensus 0.2%) after decreasing by 0.2% in September.
• Commodities:
  • WTI crude: +1.9% to $68.46/bbl
  • Gold: +1.0% to $2685.40/ozt
  • Copper: +1.7% to $4.27/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0554
  • GBP/USD: +0.1% to 1.2752
  • USD/CNH: -0.2% to 7.2673
  • USD/JPY: +0.8% to 151.24
• The Day Ahead:
  • 6:00 ET: November NFIB Small Business Optimism Index (prior 93.7)
  • 8:30 ET: Revised Q3 Productivity (Briefing.com consensus 2.2%; prior 2.2%) and Unit Labor Costs (Briefing.com consensus 1.9%; prior 1.9%)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results