Bond Market Update

10-Yr Yield Hits Fresh 52-Week High

• U.S. Treasuries began the week on a mostly lower note, lifting yields on 10s and 30s to levels last seen at the start of November 2023. Treasury futures began slipping in overnight action alongside weakness in other sovereign debt, which included continued pressure on U.K. Gilts after British Chancellor Reeves said during a weekend trip to Beijing that the October budget is "non-negotiable." The overnight weakness was followed by some early resilience that lifted all tenors into positive territory at the start of the cash session, but longer tenors faced renewed pressure shortly after the start while the short end put up a bit more of a fight. The market faced some more pressure after the late-morning release of the New York Fed's December Survey of Consumer Expectations, which showed no change in year-ahead inflation expectations (3.0%) while the three-year outlook increased to 3.0% from 2.6% and the five-year outlook dipped to 2.7% from 2.9%. Treasuries made another bounce attempt in midday action, but longer tenors eventually returned to their lowest levels of the day while the short end finished a bit above morning lows. The U.S. Treasury was scheduled to release the Monthly Treasury Statement for December, but that release did not see the light of day, presumably due to last week's closure of federal offices for President Carter's memorial. Crude oil climbed to its best level since August, extending its January gain to almost 10.0%, while the U.S. Dollar Index climbed 0.3% to 109.94.
• Yield Check:
  • 2-yr: UNCH at 4.40%
  • 3-yr: +2 bps to 4.50%
  • 5-yr: +2 bps to 4.62%
  • 10-yr: +3 bps to 4.80%
  • 30-yr: +2 bps to 4.99%

• News:
  • European Central Bank Chief Economist Lane said that more easing is likely on the way from the ECB.
  • The People's Bank of China increased its cross-border macro-prudential parameter for the first time since mid-2023 to give domestic companies greater access to foreign capital.
  • The Bank of Japan is reportedly still considering a rate hike and an increase to its inflation forecast at the policy meeting scheduled for the end of next week.
  • South Korea's exports through the first ten days of January were up 3.8% with chip exports jumping 23.8%.
  • China's December trade surplus reached $104.84 bln (expected surplus of $100.00 bln; last surplus of $97.44 bln) as imports grew 1.0% yr/yr (expected -1.5%; last -3.9%) and exports rose 10.7% yr/yr (expected 7.3%; last 6.7%).
  • India's December CPI was up 5.22% yr/yr (expected 5.30%; last 5.48%).
  • Australia's December MI Inflation Gauge was up 0.6% m/m (last 0.2%). December ANZ Job Advertisements rose 0.3% m/m (last -1.8%).
  • New Zealand's November Building Consents increased 5.3% m/m (last -5.2%).
  • Swiss December SECO Consumer Climate rose to -30 from -37 (expected -38).
• Commodities:
  • WTI crude: +3.6% to $78.99/bbl
  • Gold: -1.2% to $2680.10/ozt
  • Copper: +0.7% to $4.33/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0213
  • GBP/USD: -0.3% to 1.2172
  • USD/CNH: -0.1% to 7.3527
  • USD/JPY: UNCH at 157.71
• The Day Ahead:
  • 6:00 ET: December NFIB Small Business Optimism (prior 101.7)
  • 8:30 ET: December PPI (Briefing.com consensus 0.3%; prior 0.4%) and Core PPI (Briefing.com consensus 0.2%; prior 0.2%)