Bond Market Update

Long End Lags

• U.S. Treasuries are on track for a mostly lower start that will reverse the bulk of last week's gains in longer tenors while the 2-yr note is set to show some early strength. Longer-dated Treasury futures slumped out of the gate last evening, adding to their losses as the night went on. The selling was accompanied by weakness in other sovereign debt with Japan leading to the downside. Yields on JGBs of most tenors reached fresh highs for the year after Bank of Japan Governor Ueda made comments that bolstered expectations for a rate hike later this month. The start of the month brought the customary batch of final November Manufacturing PMI readings with China (49.2), Japan (48.7), South Korea (49.4) and the eurozone (49.6) showing contracting activity. The U.S. session will also feature the final November S&P Global U.S. Manufacturing PMI (prior 52.5) at 9:45 ET, followed by the November ISM Manufacturing Index (Briefing.com consensus 49.0%; prior 48.7%) at 10:00 ET. Crude oil is on the rise while the U.S. Dollar Index is down 0.3% at 99.14.
• Yield Check:
  • 2-yr: -1 bp to 3.48%
  • 3-yr: UNCH at 3.49%
  • 5-yr: UNCH at 3.60%
  • 10-yr: +2 bps to 4.04%
  • 30-yr: +3 bps to 4.70%

• News:
  • President Trump said that he has decided on his Fed Chairman nomination.
  • European Central Bank policymaker De Guindos said that the current level of rates is appropriate, echoing comments from other policymakers. Policymaker Nagel shared a similar view, saying that policy is broadly neutral right now.
  • China's November Manufacturing PMI hit 49.2, as expected (last 49.0) and Non-Manufacturing PMI hit 49.5 (expected 50.0; last 50.1). November RatingDog Manufacturing PMI hit 49.9 (expected 50.5; last 50.6).
  • Japan's November Manufacturing PMI hit 48.7 (expected 48.8; last 48.8). Q3 Capital Spending was up 2.9% yr/yr (expected 5.9%; last 7.6%).
  • South Korea's November trade surplus reached $9.74 bln (expected surplus of $8.40 bln; last surplus of $6.00 bln) as imports grew 1.2% yr/yr (expected 3.4%; last -1.5%) and exports rose 8.4% yr/yr (expected 5.7%; last 3.5%). November Manufacturing PMI hit 49.4 (last 49.4).
  • Hong Kong's October Retail Sales jumped 6.9% yr/yr (last 5.9%).
  • India's November Manufacturing PMI hit 56.6 (expected 57.4; last 59.2). October Industrial Production was up 0.4% yr/yr (expected 3.6%; last 4.6%) and October Manufacturing Output was up 1.8% m/m (last 4.8%).
  • Australia's final November Manufacturing PMI hit 51.6, as expected (last 51.6). November Commodity Prices were down 1.7% yr/yr (last -1.3%). November MI Inflation Gauge was up 0.3% m/m (last 0.3%). Q3 Business Inventories fell 0.9% qtr/qtr (last 0.1%). Q3 Gross Operating Profits were unchanged qtr/qtr (expected 1.7%; last -2.6%). November ANZ Job Advertisements were down 0.8% m/m (last -1.9%).
  • New Zealand's October Building Consents fell 0.9% m/m (last 7.3%).
  • Eurozone's November Manufacturing PMI hit 49.6 (expected 49.7; last 50.0).
  • Germany's November Manufacturing PMI hit 48.2 (expected 48.4; last 49.6).
  • U.K.'s November Manufacturing PMI hit 50.2, as expected (last 50.2). October Mortgage Approvals reached 65,020 (expected 64,000; last 65,650) and October Net Lending to Individuals reached GBP5.40 bln (expected GBP6.40 bln; last GBP6.60 bln).
  • France's November Manufacturing PMI hit 47.8, as expected (last 48.8).
  • Italy's November Manufacturing PMI hit 50.6 (expected 50.1; last 49.9).
  • Spain's November Manufacturing PMI hit 51.5 (expected 52.3; last 52.1).
  • Swiss October Retail Sales rose 2.7% yr/yr (expected 1.2%; last 1.8%).
• Commodities:
  • WTI Crude: +1.1% to $59.17/bbl
  • Gold: +0.7% to $4286.20/ozt
  • Copper: +0.8% to $5.312/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1644
  • GBP/USD: +0.3% to 1.3266
  • USD/CNH: UNCH at 7.0657
  • USD/JPY: -0.9% to 154.80
• Data out Today:
  • 9:45 ET: Final November S&P Global U.S. Manufacturing PMI (prior 52.5)
  • 10:00 ET: September Construction Spending (DELAYED; Briefing.com consensus 0.0%) and November ISM Manufacturing Index (Briefing.com consensus 49.0%; prior 48.7%)