Bond Market Update

Rising on Light Volume

• U.S. Treasuries are on track for a modestly higher start, though overall activity is expected to be significantly reduced given today's closure of the New York Stock Exchange for former President Carter's memorial. Treasury futures inched higher during the Asian session, followed by shallow, short-lived, dip as the focus turned to action in Europe. The night featured a fair share of news, as Japan reported its strongest growth in average cash earnings (3.0% yr/yr; expected 2.7%) in nearly a year, strengthening expectations for additional rate hikes from the Bank of Japan. In Europe, continued concerns about the U.K.'s fiscal standing drove the pound to its lowest level against the dollar since November 2023 while the 10-yr Gilt yield briefly climbed above the 5.000% mark before a rebound pressured the yield back into the 4.900% area. Domestically, dockworkers at East Coast and Gulf Coast ports reached a six-year contract deal with employers, averting a strike. Crude oil is trying to reclaim a portion of yesterday's loss while the U.S. Dollar Index is up 0.1% at 109.17.
• Yield Check:
  • 2-yr: -3 bps to 4.26%
  • 3-yr: -3 bps to 4.33%
  • 5-yr: -4 bps to 4.43%
  • 10-yr: -4 bps to 4.65%
  • 30-yr: -4 bps to 4.89%

• News: 
  • The Biden administration is reportedly planning additional restrictions on chip exports to China.
  • China's Ministry of Commerce concluded that the EU's foreign subsidies law is equivalent to a barrier on trade and investment.
  • British retailers Marks and Spencer, Greggs, and Tesco reported underwhelming results for the holiday shopping period. 
  • European Central Bank policymaker Villeroy de Galhau said that the slight increase in December CPI is not indicative of a loss of disinflationary momentum.
  • China's December CPI was unchanged m/m, as expected (last -0.6%), inching up 0.1% yr/yr, as expected (last 0.2%). December PPI was down 2.3% yr/yr (expected -2.4%; last -2.5%).
  • Japan's November Average Cash Earnings rose 3.0% yr/yr (expected 2.7%; last 2.2%) and November Overall Wage Income also increased 3.0% (last 2.2%).
  • Australia's November Retail Sales were up 0.8% m/m (expected 1.0%; last 0.5%). November trade surplus reached AUD7.079 bln (expected surplus of AUD5.62 bln; last surplus of AUD5.67 bln) as imports grew 1.7% m/m (last -0.1%) and exports rose 4.8% m/m (last 3.5%).
  • Eurozone's November Retail Sales were up 0.1% m/m (expected 0.3%; last -0.3%), rising 1.2% yr/yr (last 2.1%).
  • Germany's November Industrial Production was up 1.5% m/m (expected 0.5%; last -0.4%) but down 2.9% yr/yr (last -4.2%). November trade surplus reached EUR19.7 bln (expected surplus of EUR14.7 bln; last surplus of EUR13.4 bln) as imports fell 3.3% m/m (expected 0.7%; last -0.3%) and exports rose 2.1% m/m (expected 2.0%; last -2.9%).
  • Spain's December Business Confidence ticked up to -4.6 from -5.1.
• Commodities: 
  • WTI Crude: +0.5% to $73.67/bbl
  • Gold: +0.7% to $2689.70/ozt
  • Copper: +1.2% to $4.311/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0301
  • GBP/USD: -0.6% to 1.2284
  • USD/CNH: +0.1% to 7.3579
  • USD/JPY: -0.4% to 157.73
• No Data on Today's Schedule