Bond Market Update

Long Bond Paces Friday Slide

• U.S. Treasuries ended the week with losses in most tenors while the 2-yr note resisted the pressure, locking in a modest gain for the week. The trading day started with losses across the curve and relative weakness in the long bond, which finally gave in to pressure that had been weighing on other longer-dated sovereign debt as of late amid firming rate hike/terminal rate expectations in Japan, Australia, and New Zealand. That said, the lower start invited only some follow-through selling in 10s and 30s while the 2-yr note resisted, eventually reclaiming its starting loss. The market did not receive any data today, but next week will feature a huge batch of economic data, including some delayed reports and the Employment Situation report for November (Briefing.com consensus 30,000; prior NA) that is also expected to include some figures for October. Today's retreat sent the 30-yr yield to its highest level since early September while the 2-yr yield settled below its 50-day moving average (3.542%), down ten basis points from this week's high. Crude oil lost more than $2.50/bbl this week while the U.S. Dollar Index spent the day near its flat line at 98.37, falling 0.6% for the week.
• Yield Check:
  • 2-yr: UNCH at 3.53% (-3 bps this week)
  • 3-yr: +2 bps to 3.59% (UNCH this week)
  • 5-yr: +4 bps to 3.75% (+3 bps this week)
  • 10-yr: +5 bps to 4.19% (+5 bps this week)
  • 30-yr: +7 bps to 4.86% (+7 bps this week)

• News:
  • China held its Central Economic Work Conference with officials pledging a continuation of fiscal expansion and more interest rate and reserve requirement ratio cuts.
  • Banko Sentral ng Pilipinas lowered its policy rate by 25 basis points to 4.50%, as expected.
  • The EU will freeze Russian central bank assets held in Europe indefinitely and could use a large portion to fund a loan for Ukraine.
  • China's November New Loans reached CNY390.0 bln (last CNY220.0 bln), November Outstanding Loans grew 6.4% yr/yr (last 6.5%), and total social financing reached CNY2.49 trln (last CNY810.0 bln).
  • Japan's October Industrial Production rose 1.5% m/m (expected 1.4%; last 2.6%) and Capacity Utilization increased 3.3% m/m (last 2.5%).
  • South Korea's November Import Price Index was up 2.2% yr/yr (last 0.5%), rising 7.0% yr/yr (last 4.8%).
  • India's November CPI was up 0.71% yr/yr (expected 0.70%; last 0.25%).
  • New Zealand's November Business PMI hit 51.4 (last 51.2). November Electronic Card Retail Sales rose 1.2% m/m (last 0.2%), increasing 1.6% yr/yr (last 0.8%).
  • Germany's November CPI was down 0.2% m/m, as expected (last 0.3%) but up 2.3% yr/yr, as expected (last 2.3%).
  • U.K.'s October GDP contracted 0.1% m/m (expected 0.1%; last -0.1%) but was up 1.1% yr/yr (expected 1.4%; last 1.1%).
  • France's November CPI was down 0.2% m/m (expected -0.1%; last 0.1%) but up 0.9% yr/yr, as expected (last 0.9%).
  • Spain's November CPI was up 0.2% m/m, as expected (last 0.7%), rising 3.0% yr/yr, as expected (last 3.1%). November Core CPI was up 2.6% yr/yr, as expected (last 2.5%).
• Commodities:
  • WTI crude: -0.3% to $57.46/bbl
  • Gold: +0.4% to $4327.60/ozt
  • Copper: -2.6% to $5.36/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1742
  • GBP/USD: -0.1% to 1.3368
  • USD/CNH: +0.1% to 7.0536
  • USD/JPY: +0.2% to 155.81
• The Week Ahead:
  • Monday: December Empire State Manufacturing (Briefing.com consensus 10.6; prior 18.7) at 8:30 ET and December NAHB Housing Market Index (Briefing.com consensus 39; prior 38) at 10:00 ET
  • Tuesday: November Nonfarm Payrolls (Briefing.com consensus 30,000; prior NA), Nonfarm Private Payrolls (Briefing.com consensus 34,000; prior NA), Unemployment Rate (Briefing.com consensus 4.4%; prior NA), Average Hourly Earnings (Briefing.com consensus 0.3%; prior NA), Average Workweek (Briefing.com consensus 34.3; prior NA), September Housing Starts (Briefing.com consensus 1.320 mln; prior 1.307 mln) and Building Permits (Briefing.com consensus 1.348 mln; prior 1.312 mln), October Retail Sales (Briefing.com consensus 0.3%; prior 0.2%) and Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.3%) at 8:30 ET; November Industrial Production (Briefing.com consensus 0.1%; prior NA) and Capacity Utilization (Briefing.com consensus 77.4%; prior NA) at 9:15 ET; flash December S&P Global U.S. Manufacturing PMI (prior 52.2) and flash December S&P Global U.S. Services PMI (prior 54.1) at 9:45 ET; and September Business Inventories (Briefing.com consensus 0.1%; prior NA) at 10:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior 4.8%) at 7:00 ET; November Retail Sales (Briefing.com consensus 0.2%; prior NA) and Retail Sales ex-auto (Briefing.com consensus 0.2%; prior NA) at 8:30 ET; October Business Inventories (Briefing.com consensus 0.1%; prior NA) at 10:00 ET; and weekly crude oil inventories (prior -1.81 mln) at 10:30 ET
  • Thursday: November CPI (Briefing.com consensus 0.3%; prior NA), Core CPI (Briefing.com consensus 0.3%; prior NA), weekly Initial Claims (Briefing.com consensus 229,000; prior 236,000), and Continuing Claims (prior 1.383 mln), and December Philadelphia Fed survey (Briefing.com consensus 2.9; prior -1.7) at 8:30 ET; November Leading Indicators (Briefing.com consensus -0.1%; prior NA) at 10:00 ET; weekly natural gas inventories (prior -177 bcf) at 10:30 ET; and October Net Long-Term TIC Flows (prior NA) at 16:00 ET
  • Friday: November Existing Home Sales (Briefing.com consensus 4.10 mln; prior 4.10 mln) and final December University of Michigan Consumer Sentiment (Briefing.com consensus 53.3; prior 53.3)