Bond Market Update

A Steady Turn

• U.S. Treasuries vacillated today but maintained a mostly positive bias. Stronger gains were registered overnight as European bourses were unable to hold early gains, yet most of those gains were relinquished following a stronger-than-expected Empire State Manufacturing Index for November. Treasuries steadied themselves during the cash session, as U.S. indices faced renewed selling pressure, with mega-cap stocks and financial shares pacing a broad-based retreat that was tinged with concerns about growth, valuations, and credit quality. The greenback showed some strength today against other major currencies, as rate cut expectations for the December FOMC meeting continued to fade, slipping below 40.0% at one juncture. The U.S. Dollar Index was up 0.3% to 99.57.
• Yield Check:
  • 2-yr: unch at 3.61%
  • 3-yr: -1 bp to 3.61%
  • 5-yr: -2 bps to 3.72%
  • 10-yr: -2 bps to 4.13%
  • 30-yr: -1 bp to 4.74%

• News:
  • USTR Jamieson Greer is frustrated with EU's slow pace of regulation and tariff cuts. FT
  • Senator Bill Cassidy in an interview says he is working with the White House on a healthcare plan that would involve sending subsidies to Americans instead of insurance companies. CBS News
  • Treasury Secretary Bessent said the U.S. is targeting completion of a rare earths trade agreement with China by Thanksgiving, with the expectation that the U.S. military won't be excluded from the deal.
  • Former Fed Governor Adriana Kugler allegedly violated Federal Reserve trading rules. Washington Post
  • Fed Vice Chair Phillip Jefferson says "evolving balance of risks underscores the need to proceed slowly as we approach the neutral rate"
  • President Trump is considering talks with Venezuelan President Nicolás Maduro amid U.S. military buildup in the region. Washington Post
  • EU will warn Commerce Secretary Howard Lutnick next week against expanding list of products that are subject to steel tariffs, according to Bloomberg
  • China sends ships near disputed islands with Japan and warns travelers about safety risks. NY Times
  • DoubleLine Capital's Jeffrey Gundlach recommends a 20% cash position to guard against a downturn in the equity market. Bloomberg
  • China has warned its citizens against traveling to Japan "for safety reasons."
  • The European Commission is forecasting 1.2% GDP growth for the eurozone in 2026 versus 1.3% in 2025, with its inflation forecast marked down to 1.9% versus 2.1% in 2025
  • Japan's 10-yr JGB yield hits its highest level since 2008
  • Japan's Q3 GDP -0.4% qtr/qtr (-0.6% expected; 0.6% last) and -1.8% yr/yr (-2.5% expected; 2.3% last)
• Today's Data:
  • November NY Empire State Manufacturing Index (Actual 18.7; Briefing.com consensus: 6.1; Prior 10.7)
  • Total construction spending increased 0.2% month-over-month in August (Briefing.com consensus: 0.1%) following an upwardly revised 0.2% increase (from -0.1%) in July. Total private construction was up 0.3% month-over-month, while total public construction was flat month-over-month. On a year-over-year basis, total construction spending was down 1.6%.
    • The key takeaway from the report is that the increase in spending came solely from the residential side; unfortunately, that did not include new single-family construction activity. The strength was concentrated in new multifamily construction.
• Commodities:
  • WTI crude: -0.3% to $59.92/bbl
  • Gold: -0.6% to $4072.60/ozt
  • Copper: -1.0% to $5.01/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1584
  • GBP/USD: -0.2% to 1.3147
  • USD/CNH: +0.2% to 7.1106
  • USD/JPY: +0.4% to 155.22
• The Day Ahead:
  • 09:15 ET: October Industrial Production and Capacity Utilization
  • 10:00 ET: November NAHB Housing Market Index
  • 10:30 ET: Fed Governor Barr on Bank Supervision (FOMC voter)
  • 16:00 ET: September Net Long-Term TIC Flows