Bond Market Update

Bounce Extended

• U.S. Treasuries are on track for a higher start, seeking to continue yesterday's rebound off fresh lows for the month. Treasury futures inched higher during the early portion of the overnight session before giving back some of their gains as the night went on. Other sovereign debt has also advanced, but the overall gains have been limited. The overnight session featured a customary rate cut from the Hong Kong Monetary Authority to follow the cut from the FOMC. However, investor sentiment has seen some pressure on the equity side due to underwhelming quarterly results from Oracle (ORCL) and ongoing concerns about the company's debt load. The market will receive a handful of economic reports this morning and the U.S. Treasury will cap this week's note and bond auction slate with a $22 bln 30-yr bond reopening at 13:00 ET. Crude oil is falling back below $58/bbl while the U.S. Dollar Index is down 0.3% at 98.50.
• Yield Check:
  • 2-yr: -4 bps to 3.53%
  • 3-yr: -4 bps to 3.57%
  • 5-yr: -5 bps to 3.71%
  • 10-yr: -3 bps to 4.13%
  • 30-yr: -3 bps to 4.77%

• News:
  • Japan sold 20-yr JGBs to solid demand.
  • The Japanese government plans to offer corporate tax credits on some investments and lower the threshold for the income tax on the wealthiest individuals.
  • South Korea's exports were up 17.3% yr/yr through the first ten days of December with chip shipments jumping 45.9%.
  • The Hong Kong Monetary Authority followed yesterday's rate cut from the FOMC with its own 25-basis point reduction to 4.00%.
  • The Swiss National Bank left its policy rate at 0.00%, as expected. The central bank did not rule out cutting rates into negative territory if needed.
  • German Chancellor Merz is reportedly trying to organize a meeting on Ukraine sometime next week.
  • Japan's Q4 BSI Large Manufacturing Conditions rose to 4.7 from 3.8 (expected 4.1).
  • Australia's November Employment decreased by 21,300 (expected 20,000; last 41,100) and full employment change decreased by 56,500 (last 55,300). November Unemployment Rate remained at 4.3% (expected 4.4%) while Participation Rate fell to 66.7% from 66.9% (expected 67.0%).
  • New Zealand's Q3 Manufacturing Sales Volume rose 1.1% qtr/qtr (last -2.8%).
  • Singapore's Q3 Unemployment Rate remained at 2.0%, as expected.
  • Italy's Q3 Unemployment Rate fell to 6.1% from 6.3% (expected 6.3%).
• Commodities:
  • WTI Crude: -1.1% to $57.80/bbl
  • Gold: +0.5% to $4246.90/ozt
  • Copper: +1.2% to $5.417/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1716
  • GBP/USD: +0.1% to 1.3390 
  • USD/CNH: -0.1% to 7.0556
  • USD/JPY: -0.2% to 155.54
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (prior 191,000), Continuing Claims (prior 1.939 mln), and September Trade Balance (Briefing.com consensus -$61.7 bln; prior -$59.6 bln)
  • 10:00 ET: September Wholesale Inventories (Briefing.com consensus -0.2%; prior NA)
  • 10:30 ET: Weekly natural gas inventories (prior -12 bcf)
• Treasury Auctions:
  • 13:00 ET: $22 bln 30-yr Treasury bond reopening results