Bond Market Update

Wednesday Bounce Extended

• U.S. Treasuries extended their midweek bounce on Thursday, though the advance found some intraday resistance, which left yields 5s and longer tenors above their opening levels. Treasuries followed yesterday's bounce off fresh lows for the month with a higher start and an early extension of their gains. The Treasury complex rallied through the release of a sharp increase in weekly Initial Claims (to 236,000 from 192,000), though that jump followed the lowest weekly total since early 2024. Separately, the Trade Balance report for September showed a narrowing in the deficit to $52.8 bln (Briefing.com consensus -$61.7 bln) from $59.3 bln in August. The morning advance pressured the 5-yr yield toward its 50-day moving average (3.668%), but the market found resistance before the 5-yr yield reached that level. Treasuries slowly drifted down from their highs as the morning went on, seeing some late selling amid media focus on growing tension with Venezuela. The U.S. recently seized an oil tanker off Venezuela's coast and Reuters reported this afternoon that the Trump administration could seize additional rogue vessels in the future. The late slide, which pushed yields on 5s, 10s, and 30s above their opening levels, developed despite a solid $22 bln 30-yr bond reopening that made for a strong finish to this week's auction slate. Crude oil fell back below $58/bbl while the U.S. Dollar Index fell 0.5% to 98.32, reaching its lowest level since mid-October.
• Yield Check:
  • 2-yr: -4 bps to 3.53%
  • 3-yr: -4 bps to 3.57%
  • 5-yr: -4 bps to 3.72%
  • 10-yr: -2 bps to 4.14%
  • 30-yr: -1 bp to 4.79%

• News:
  • The U.S. Treasury sanctioned several family members and allies of Venezuela's leader Maduro.
  • 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%).
• Today's Data:
  • The September trade deficit narrowed to $52.8 billion (Briefing.com consensus: -$61.7 billion) from an upwardly revised $59.3 billion (from -$59.6 billion) in August.
    • The key takeaway from the report is that the narrower deficit was the byproduct of exports being $8.4 billion more than August exports and imports being $1.9 billion more than August imports.
  • Initial jobless claims for the week ending December 6 increased by 44,000 to 236,000. Poor seasonal adjustment factors have attracted blame for the big week-over-week jump in initial claims from the Thanksgiving week. Continuing jobless claims for the week ending November 29 decreased by 99,000 to 1.838 million, which is the lowest since April 2025.
    • The key takeaway from the report is that, on balance, it doesn't point to a material weakening in the labor market.
  • Wholesale Inventories increased by 0.5% in September (Briefing.com consensus -0.2%) after decreasing by 0.1% in August.
  • Weekly natural gas inventories decreased by 177 bcf after decreasing by 12 bcf a week ago.
  • $22 bln 30-year Treasury bond reopening results (prior 12-auction average):
    • High yield: 4.773% (4.756%).
    • Bid-to-cover: 2.36 (2.37).
    • Indirect bid: 65.4% (63.5%).
    • Direct bid: 23.5% (23.1%).
• Commodities:
  • WTI crude: -1.6% to $57.61/bbl
  • Gold: +2.1% to $4312.70/ozt
  • Copper: +2.8% to $5.50/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1737
  • GBP/USD: +0.1% to 1.3385
  • USD/CNH: -0.1% to 7.0512
  • USD/JPY: -0.2% to 155.64
• No Data on Tomorrow's Schedule