Bond Market Update

Monday Losses Recovered

• U.S. Treasuries climbed on Wednesday, making for a solid bounce from Monday's retreat. The market followed yesterday's Veterans Day closure with a firmly higher start that was paced by the belly of the curve. The first few minutes of the cash session saw a shallow pullback, but Treasuries bounced swiftly with the long bond spending the bulk of the day in a steady rise while shorter tenors extended their starting gains by a smaller margin. The rally sent yields on 10s and 30s back below their 50-day moving averages, where they remained despite an afternoon dip from highs that followed the completion of a lousy $42 bln 10-yr note sale. Crude oil fell to a three-week low after finding resistance near its 50-day moving average (61.33) while the U.S. Dollar Index inched up 0.1% to 99.50.
• Yield Check:
  • 2-yr: -2 bps to 3.57%
  • 3-yr: -4 bps to 3.56%
  • 5-yr: -4 bps to 3.67%
  • 10-yr: -4 bps to 4.07%
  • 30-yr: -4 bps to 4.66%

• News:
  • The White House believes that Q4 GDP was lowered by about two percentage points due to the government shutdown.
  • White House Press Secretary Leavitt said that the Employment Situation report for October and October CPI are unlikely to ever be released.
  • The Supreme Court will hear the Trump administration's argument for firing Fed Governor Cook on January 21.
  • Taiwan and Vietnam are reportedly closing in on final trade deals with the U.S.
  • The People's Bank of China said in its Q3 monetary policy report that an appropriately loose stance will be maintained.
  • Reserve Bank of Australia Deputy Governor Hauser said that policy remains restrictive, but policymakers are on a lookout for changes in the environment.
  • The Bank of France expects only domestic growth in Q4 after a 0.5% increase in Q3.
  • Japan's November Reuters Tankan Index jumped to 17 from 8. October M2 Money Stock was up 1.6% yr/yr (expected 1.8%; last 1.5%) and October Machine Tool Orders rose 16.8% yr/yr (expected 9.9%; last 8.1%).
  • South Korea's October Unemployment Rate rose to 2.6% from 2.5%. September M2 Money Supply was up 7.2% yr/yr (last 6.8%).
  • India's October CPI was up 0.25% yr/yr (expected 0.48%; last 1.44%).
  • Australia's O3 Invest Housing Finance rose 17.6% qtr/qtr (expected 4.0%; last 2.6%) and Q3 Home Loans rose 4.7% qtr/qtr (expected 2.5%; last 2.2%).
  • Germany's October CPI was up 0.3% m/m, as expected (last 0.2%), rising 2.3% yr/yr, as expected (last 2.4%). October WPI was up 0.3% m/m (expected 0.1%; last 0.2%), rising 1.1% yr/yr (last 1.2%).
  • Italy's September Industrial Production was up 2.8% m/m (expected 1.5%; last -2.7%), rising 1.5% yr/yr (expected -0.5%; last -3.0%).
• Today's Data:
  • The weekly MBA Mortgage Index rose 0.6% after falling 1.9% a week ago. The Purchase Index was up 5.8% while the Refinance Index fell 3.4%.
  • $42 bln 10-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.074% (4.347%).
    • Bid-to-cover: 2.43 (2.56).
    • Indirect bid: 67.0% (70.1%).
    • Direct bid: 22.6% (18.4%).
• Commodities:
  • WTI crude: -4.1% to $58.50/bbl 
  • Gold: +2.4% to $4213.00/ozt 
  • Copper: +0.8% to $5.11/lb
• Currencies:
  • EUR/USD: UNCH at 1.1586
  • GBP/USD: -0.1% to 1.3130
  • USD/CNH: -0.1% to 7.1118
  • USD/JPY: +0.4% to 154.72
• The Day Ahead:
  • 8:30 ET: October CPI (Briefing.com consensus 0.2%; prior 0.3%), Core CPI (Briefing.com consensus 0.3%; prior 0.2%), Initial Claims (prior NA), and Continuing Claims (prior NA)
  • 12:00 ET: Weekly crude oil inventories (prior +5.20 mln)
  • 14:00 ET: October Treasury Budget (Briefing.com consensus -$310.0 bln; prior $198.0 bln)
• Treasury Auctions:
  • 13:00 ET: $25 bln 30-yr Treasury bond auction results