Bond Market Update

Looming Shutdown End Weighs

• U.S. Treasuries are on track for a lower start with the belly set to pace the early selling. Treasury futures slumped out of the gate on Sunday evening, adding to their losses as the night went on. The retreat took place amid gains in equity futures in reaction to news that the U.S. Senate reached a deal to end the 40-day shutdown. U.S. Treasuries are a clear underperformer this morning while other sovereign debt is mostly little changed. Economic data released overnight included China's CPI, which was a bit hotter than expected in October, lifting the yr/yr rate out of deflation (to 0.2% from -0.3%), while PPI remained in deflation, falling 2.1% yr/yr. The U.S. session will not see the release of any data but the U.S. Treasury will sell $58 bln in 3-yr notes this afternoon. Crude oil holds a modest gain near $60/bbl while the U.S. Dollar Index is flat at 99.56.
• Yield Check:
  • 2-yr: +3 bps to 3.59%
  • 3-yr: +4 bps to 3.61%
  • 5-yr: +4 bps to 3.72%
  • 10-yr: +4 bps to 4.13%
  • 30-yr: +3 bps to 4.73%

• News:
  • The Chinese government relaxed export restrictions on some rare earth metals.
  • The Bank of Japan's latest Summary of Opinions showed that policymakers see the need for continued wage hikes from companies.
  • The European Central Bank is starting to look for a replacement for Vice President de Guindos, whose term ends in May.
  • China's October CPI was up 0.2% m/m (last 0.1%), rising 0.2% yr/yr (expected 0.0%; last -0.3%). October PPI was down 2.1% yr/yr (expected -2.3%; last -2.3%).
  • Japan's September Leading Index rose to 108.0 from 107.0 (expected 107.9) and Coincident Indicator was up 1.8% m/m (last -1.3%).
  • Australia's September Building Approvals rose 12.0% m/m, as expected (last -3.6%) and Private House Approvals rose 4.0% m/m, as expected (last -1.0%).
  • Eurozone's November Sentix Investor Confidence fell to -7.4 from -5.4 (expected -3.9).
• Commodities:
  • WTI Crude: +0.5% to $60.06/bbl
  • Gold: +2.3% to $4102.60/ozt
  • Copper: +1.8% to $5.044/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1571
  • GBP/USD: +0.2% to 1.3184
  • USD/CNH: UNCH at 7.1220
  • USD/JPY: +0.5% to 154.10
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results