Bond Market Update

Inching Higher Ahead of Delayed Jobs Reports

• U.S. Treasuries began the week on a positive note, though intraday action saw a pullback from morning highs. Treasuries started the day with solid gains in longer tenors while the short end underperformed slightly but eventually took the lead. The higher open followed a night that saw the release of underwhelming November growth figures from China, including the slowest Retail Sales growth (1.3%) since late 2022 while house prices fell for the 41st time out of the past 43 months. The Unemployment Rate stayed at 5.1%, making for a small silver lining. Treasuries added to their starting gains after the Empire State Manufacturing survey (-3.9; Briefing.com consensus 10.6) came in below expectations, but the buying interest faded as the morning went on. Treasuries backed down from their highs in mid-morning action, finding support a bit below today's opening levels, but above their closing levels from last week. Tomorrow will bring a torrent of economic data, headlined by the Employment Situation report for November (Briefing.com consensus 30,000) that will also fill some data gaps from October. Crude oil fell below $57/bbl with its 2025 low (55.12) not far away.
• Yield Check:
  • 2-yr: -2 bps to 3.51%
  • 3-yr: -3 bps to 3.56%
  • 5-yr: -2 bps to 3.73%
  • 10-yr: -1 bp to 4.18%
  • 30-yr: -1 bp to 4.85%

• News:
  • The Atlanta Fed has begun the search for its next president.
  • President Trump said that his search for the next Fed Chairman nominee is down to Kevin Hassett and Kevin Warsh.
  • China added roughly 300 steel products to its list of items that require an export license.
  • Reserve Bank of New Zealand Governor Breman said that financial conditions have tightened more than expected since the central bank's November meeting.
  • Switzerland's SECO raised its domestic growth forecast for 2026 to 1.1% from 0.9% while the CPI outlook for 2026 was lowered to 0.2% from 0.5%. Meanwhile, KOF also raised its domestic growth forecast for 2026 to 1.1% from 0.9% while the CPI outlook was cut to 0.3% from 0.5%.
  • China's November Industrial Production was up 4.8% yr/yr (expected 5.0%; last 4.9%), November Retail Sales rose 1.3% yr/yr (expected 3.0%; last 2.9%), and November Fixed Asset Investment fell 2.6% yr/yr (expected -2.4%; last -1.7%). November Unemployment Rate remained at 5.1%, as expected, and November House Prices fell 2.4% yr/yr (last -2.2%).
  • Japan's Q4 Tankan Large Manufacturers Index hit 15, as expected (last 14), and Large Non-Manufacturers Index remained at 28, as expected. Tankan All Big Industry Capex was up 12.6% (expected 12.0%; last 12.5%). Tankan Q4 Small Manufacturing Index rose to 6 from 1 (expected 2). October Tertiary Industry Activity Index was down 0.70 (last 4.70).
  • South Korea's November trade surplus reached $9.74 bln (last surplus of $9.74 bln) as imports rose 1.1% yr/yr (last 1.2%) and exports grew 8.4% yr/yr (last 8.4%).
  • India's November trade deficit reached $24.53 bln (last deficit of $41.68 bln). November WPI Inflation was down 0.32% yr/yr (expected -0.60%; last -1.21%).
  • Hong Kong's Q3 PPI was up 7.7% (last 4.0%).
  • New Zealand's November Performance of Services Index fell to 46.9 from 48.4.
  • Eurozone's October Industrial Production was up 0.8% m/m (last 0.2%), rising 2.0% yr/yr (last 1.2%).
  • Germany's November WPI was up 0.3% m/m (last 0.3%), rising 1.5% yr/yr (last 1.1%).
  • Swiss November PPI was down 0.5% m/m (last -0.3%), falling 1.6% yr/yr (last -1.7%).
• Today's Data:
  • The Empire State Manufacturing Survey fell to -3.9 in December (Briefing.com consensus 10.6) from 18.7 in November.
  • The NAHB Housing Market Index rose to 39 in December (Briefing.com consensus 39) from 38 in November.
• Commodities:
  • WTI crude: -1.1% to $56.82/bbl
  • Gold: +0.2% to $4335.50/ozt
  • Copper: +0.9% to $5.41/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1748
  • GBP/USD: UNCH at 1.3371
  • USD/CNH: -0.1% to 7.0433
  • USD/JPY: -0.3% to 155.25
• The Day Ahead:
  • 8:30 ET: 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%)
  • 9:15 ET: November Industrial Production (Briefing.com consensus 0.1%; prior NA) and Capacity Utilization (Briefing.com consensus 77.4%; prior NA)
  • 9:45 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)
  • 10:00 ET: September Business Inventories (Briefing.com consensus 0.1%; prior NA)