Bond Market Update

Sliding Rate Cut Odds Weigh

• U.S. Treasuries finished a bumpy abbreviated week with losses across the curve after sliding from their opening highs. The trading day started with gains across the curve after a night that saw selling in global equities and most sovereign debt. British gilts underperformed notably amid growing speculation that Chancellor Reeves will not longer call for a higher income tax in her Autumn budget statement, but the prospect of other tax hikes remains. Treasuries began sliding from their starting levels immediately after the open, remaining pressured into the afternoon. The slide lifted yields on all tenors back above their respective 50-day moving averages with the 30-yr yield also rising past its prior November high to a level not seen since early October. There was some additional pressure on rate cut expectations with the implied likelihood sliding below the 50.0% threshold after Kansas City Fed President (FOMC voter) Schmid said that he is leaning against a December rate cut shortly after Minneapolis Fed President (2026 voter) Kashkari said that he did not support the October cut and is not sure about December. Crude oil climbed, turning slightly positive for the week (+$0.35/bbl), while the U.S. Dollar Index rose 0.2% to 99.30, trimming this week's loss to 0.3%.
• Yield Check:
  • 2-yr: +2 bps to 3.61% (+5 bps this week)
  • 3-yr: +3 bps to 3.62% (+5 bps this week)
  • 5-yr: +3 bps to 3.74% (+6 bps this week)
  • 10-yr: +4 bps to 4.15% (+6 bps this week)
  • 30-yr: +5 bps to 4.75% (+5 bps this week)

• News:
  • National Economic Council Director Hassett said that a partial release of the October jobs report is being planned and that the full September jobs report could be released next week.
  • The Trump administration is planning some tariff exemptions aimed at easing food inflation, according to The New York Times.
  • Officials from South Korea and the U.S. officially signed the trade and investment deal.
  • Germany's budget committee approved 2026 spending of EUR524.5 bln and nearly EUR100 bln in borrowing.
  • China's October Fixed Asset Investment was down 1.7% yr/yr (expected -0.9%; last -0.5%), October Industrial Production rose 4.9% yr/yr (expected 5.5%; last 6.5%), October Retail Sales increased 2.9% yr/yr (expected 2.7%; last 3.0%), rising 3.3% yr/yr (last 3.5%). October Unemployment Rate dipped to 5.1% from 5.2% (expected 5.2%). October House Prices were down 2.2% yr/yr (last -2.2%).
  • South Korea's October Import Price Index was up 0.5% yr/yr (last 0.6%) and Export Price Index was up 4.8% yr/yr (last 2.2%).
  • India's October WPI Inflation was down 1.21% yr/yr (expected -0.60%; last 0.13%).
  • Hong Kong's Q3 GDP expanded 0.7% qtr/qtr, as expected (last 0.7%), growing 3.8% yr/yr, as expected (last 3.8%).
  • New Zealand's October Business PMI hit 51.4 (last 50.1).
  • Eurozone's Q3 GDP expanded 0.2% qtr/qtr, as expected (last 0.1%), growing 1.4% yr/yr (expected 1.3%; last 1.5%). Q3 Employment increased by 0.1% qtr/qtr, as expected (last 0.1%), growing 0.5% yr/yr (last 0.6%). September trade surplus reached EUR19.4 bln (last surplus of EUR1.9 bln).
  • France's October CPI was up 0.1% m/m, as expected (last -1.0%), rising 0.9% yr/yr (expected 1.0%; last 1.2%).
  • Italy's September trade surplus reached EUR2.852 bln (expected surplus of EUR3.180 bln; last surplus of EUR1.875 bln).
  • Spain's October CPI was up 0.7% m/m, as expected (last -0.3%), rising 3.1% yr/yr, as expected (last 3.0%). October Core CPI was up 2.5% yr/yr, as expected (last 2.4%).
• Today's Data:
  • Weekly natural gas inventories increased by 45 bcf after increasing by 33 bcf a week ago.
• Commodities:
  • WTI crude: +2.3% to $60.08/bbl
  • Gold: -2.4% to $4095.20/ozt
  • Copper: -0.8% to $5.06/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1619
  • GBP/USD: -0.2% to 1.3164
  • USD/CNH: +0.1% to 7.1003
  • USD/JPY: UNCH at 154.54
• The Week Ahead:
  • Monday: November Empire State Manufacturing (Briefing.com consensus 6.1; prior 10.7) at 8:30 ET
  • Tuesday: October Import/Export Prices at 8:30 ET; October Industrial Production (Briefing.com consensus 0.1%; prior NA) and Capacity Utilization (Briefing.com consensus 77.5%; prior NA) at 9:15 ET; November NAHB Housing Market Index (Briefing.com consensus 36; prior 37) at 10:00 ET; and September net Long-Term TIC Flows (prior NA) at 16:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior 0.6%) at 7:00 ET; October Housing Starts (Briefing.com consensus 1.340 mln; prior NA) and Building Permits (Briefing.com consensus 1.355 mln; prior NA) at 8:30 ET; weekly crude oil inventories (prior 6.41 mln) at 10:30 ET; and $16 bln 20-yr Treasury bond auction results at 13:00 ET
  • Thursday: Weekly Initial Claims (prior NA), Continuing Claims (prior NA), and November Philadelphia Fed survey (Briefing.com consensus 2.0; prior -12.8) at 8:30 ET; October Existing Home Sales (Briefing.com consensus 4.08 mln; prior 4.06 mln) and October Leading Indicators (prior NA) at 10:00 ET; and weekly natural gas inventories (prior +45 bcf) at 10:30 ET
  • Friday: Flash November S&P Global U.S. Manufacturing PMI (prior 52.5) and flash November S&P Global U.S. Services PMI (prior 54.8) at 9:45 ET; and final November University of Michigan Consumer Sentiment (Briefing.com consensus 50.3; prior 50.3) at 10:00 ET