Bond Market Update

Long End Leads Early Selling

• U.S. Treasuries are on track for a lower start in longer tenors while the short end is set to show some relative strength after underperforming yesterday. The biggest news development of the night was President Trump's meeting with China's President Xi. After the meeting, President Trump agreed to reduce the fentanyl-related tariff to 10% and said that there is no roadblock when it comes to rare earths, adding that he will visit China in April. Treasury futures spent the early part of the night in a sideways range before sliding to lows in recent trade. In Europe, the eurozone's flash Q3 GDP reading (0.2%; expected 0.1%) was just ahead of expectations thanks to above-consensus growth in France. The European Central Bank will release its latest policy Statement at 9:15 ET, but a rate cut is not expected today. The market was scheduled to receive the advance reading of Q3 GDP this morning, but that report will likely not come out due to the ongoing shutdown. Crude oil is on the defensive while the U.S. Dollar Index is flat at 99.25.
• Yield Check:
  • 2-yr: +3 bps to 3.61%
  • 3-yr: +2 bps to 3.61%
  • 5-yr: +3 bps to 3.73%
  • 10-yr: +4 bps to 4.10%
  • 30-yr: +5 bps to 4.65%

• News:
  • Japan's Prime Minister Takaichi will meet with China's President Xi tomorrow.
  • The Hong Kong Monetary Authority followed the Fed's rate cut with a 25-basis point reduction of its own, lowering its policy rate to 4.25%.
  • The Bank of Japan left its rate at 0.50%, as expected.
  • Singapore's Q3 Unemployment Rate remained at 2.0% (last 2.0%).
  • Australia's Q3 Import Price Index was down 0.4% qtr/qtr (expected -0.3%; last -0.8%), falling 0.9% qtr/qtr (last -4.5%).
  • New Zealand's October ANZ Business Confidence rose to 58.1 from 49.6.
  • Eurozone's Q3 GDP expanded 0.2% qtr/qtr (expected 0.1%; last 0.1%), growing 1.3% yr/yr (expected 1.2%; last 1.5%). October Business and Consumer Survey rose to 96.8 from 95.6 (expected 95.7).
  • Germany's Q3 GDP was unchanged qtr/qtr, as expected (last -0.3%), rising 0.3% yr/yr, as expected (last 0.2%). September Unemployment decreased by 1,000 (expected 8,000; last 13,000).
  • France's Q3 GDP expanded 0.5% qtr/qtr (expected 0.2%; last 0.3%), growing 0.9% yr/yr (expected 0.6%; last 0.7%). September Consumer Spending was up 0.3% m/m (expected 0.0%; last 0.2%). October Unemployment Rate remained at 6.3%, as expected (last 6.3%).
  • Italy's Q3 GDP was unchanged qtr/qtr (expected 0.1%; last -0.1%), rising 0.4% yr/yr (expected 0.6%; last 0.4%). September Unemployment Rate rose to 6.1% from 6.0% (expected 6.0%). August Industrial Sales were down 0.7% m/m (last 0.4%), falling 0.1% yr/yr (last 1.2%). 
  • Spain's October CPI was up 0.7% m/m (last -0.3%), rising 3.1% yr/yr (expected 2.9%; last 3.0%). October Core CPI was up 2.5% yr/yr (last 2.4%).
  • Swiss October KOF Leading Indicators rose to 101.3 from 98.0 (expected 98.4).
• Commodities:
  • WTI Crude: -0.6% to $60.13/bbl
  • Gold: -0.4% to $3984.80/ozt
  • Copper: -1.5% to $5.183/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1595
  • GBP/USD: -0.1% to 1.3176
  • USD/CNH: +0.3% to 7.1143
  • USD/JPY: +1.0% to 154.12
• Data out Today:
  • 8:30 ET: Advance Q3 GDP (Briefing.com consensus 3.0%; prior 3.8%), advance Q3 GDP Deflator (Briefing.com consensus 2.7%; prior 2.1%), weekly Initial Claims (Briefing.com consensus 257,000; prior NA), and Continuing Claims (prior NA)
  • 10:30 ET: Weekly natural gas inventories (prior +87 bcf)