Bond Market Update

Updated: 03-Jan-25 15:10 ET

Treasury Market Summary

A High Settlement

U.S. Treasuries saw some buying interest overnight with interest rate differentials playing a part in foreign interest. The overnight gains were lost, though, in the wake of the 10:00 a.m. ET release of the December ISM Manufacturing PMI, which was stronger than expected and featured an uptick in the Prices Index. Sellers applied pressure from that point on. Yields settled at their highs for the session as stocks rallied, suggesting perhaps some rotational activity out of bonds and into stocks. Next week promises to be a more active week of trading with new supply coming in several auctions (3-yr, 10-yr, 30-yr) and key economic data waiting at the end of the week in the form of the December Employment Situation Report. The U.S. Dollar Index dropped 0.4% to 108.95 as the euro and the British pound showed some rebound action after Thursday's drubbing.

Yield Check:
- 2-yr: +3 bps to 4.28%
- 3-yr: +4 bps to 4.32%
- 5-yr: +3 bps to 4.41%
- 10-yr: +2 bps to 4.60%
- 30-yr: +2 bps to 4.80%
News:
- Rep. Mike Johnson (R-LA) elected Speaker of the House after two Republican holdouts switch votes to Mr. Johnson
- The PBOC said it will cut the 7-day reverse repo rate (currently 1.50%) "at an appropriate time" in 2025, according to FT
- Treasury Department and Federal Housing Finance Agency amend preferred stock purchase agreements for Fannie Mae (FNMA) and Freddie Mac (FMCC)
- China's NDRC plans to increase its issuance of ultra long bonds to subsidize a consumer trade-in program, which will include smartphones, in a bid to boost consumption
- China added 28 U.S. companies, including Boeing Defense Space and Security, to its export control list
- Chinese government bond yields fall to new record lows
- Bloomberg reports that President Biden will announce his decision today to block Nippon Steel's acquisition of U.S. Steel
- Germany's unemployment change was less than expected in December and its unemployment rate held steady at 6.1%
- South Korea's acting President Choi vows "swift and bold" support measures for the market if volatility increases
- South Korean officials tried to arrest President Yoon at the presidential compound, but failed after a multi-hour standoff with security forces there
Commodities:
- WTI crude: +1.2% to $73.95/bbl
- Gold: -0.5% to $2655.10/ozt
- Copper: +1.2% to $4.07/lb
Currencies:
- EUR/USD: +0.4% to 1.0300
- GBP/USD: +0.4% to 1.2425
- USD/CNH: +0.3% to 7.3613
- USD/JPY: -0.2% to 157.22
The Week Ahead:
- Monday: December S&P Global US Services PMI; November Factory Orders; $58 billion 3-yr note auction
- Tuesday: November Trade Balance; December ISM Services PMI; November JOLTS - Job Openings; $39 billion 10-yr note auction
- Wednesday: MBA Mortgage Applications Index; December ADP Employment Change; EIA Crude Oil Inventories; FOMC Minutes; November Consumer Credit; $22 billion 30-yr bond auction
- Thursday: Initial and Continuing Jobless Claims; November Wholesale Inventories; EIA Natural Gas Inventories
- Friday: December Employment Situation Report; Preliminary January univerity of Michigan Index of Consumer Sentiment