Bond Market Update

Looking to Rise Again

• U.S. Treasuries are on track for a modestly higher start that should help all tenors reclaim their slight midweek losses at the open. Treasury futures inched higher in early evening trade, adding to their gains as the night went on with pre-market highs being reached after the Bank of England announced a 5-4 vote to lower its bank rate by 25 basis points to 3.75%, which was expected. The overnight session saw just a small slate of economic data while the overall news flow was subdued. President Trump said during last evening's televised address that his Fed Chairman nominee will support much lower rates. He also announced a bonus for soldiers and said that he intends to implement aggressive housing reform. The market is scheduled to receive the delayed November CPI report at 8:30 ET, but that report will not include the month-over-month percent change for November due to missing data from October. Crude oil hovers near $56/bbl while the U.S. Dollar Index is up 0.2% at 98.54.
• Yield Check:
  • 2-yr: -3 bps to 3.46%
  • 3-yr: -3 bps to 3.50%
  • 5-yr: -3 bps to 3.67%
  • 10-yr: -2 bps to 4.13%
  • 30-yr: -1 bp to 4.82%

• News:
  • Japan is planning record defense spending of JPY9 trln for 2026.
  • The People's Bank of China injected some liquidity through reverse repurchases.
  • China Securities Times speculated that the need for reserve requirement ratio cuts is lower due to proactive fiscal policy.
  • Australia reduced its borrowing forecast for 2026 by AUD25 bln due to an improved surplus forecast.
  • Central banks in Norway and Sweden did not make any policy changes.
  • EU officials are meeting in Brussels to discuss a potential seizure of frozen Russian assets, but several countries remain opposed to this action.
  • Germany is planning record debt issuance of EUR512 bln for 2026.
  • Australia's December MI Inflation Expectations accelerated to 4.7% from 4.5%.
  • New Zealand's Q3 GDP expanded 1.1% qtr/qtr (expected 0.9%; last -1.0%), growing 1.3% yr/yr, as expected (last -1.1%).
  • Eurozone's October Construction Output was up 0.88% m/m (last -0.58%).
  • France's December Business Survey rose to 102 from 98 (expected 98).
  • Swiss November trade surplus reached CHF3.841 bln (expected surplus of CHF5.32 bln; last surplus of CHF4.203 bln).
• Commodities:
  • WTI Crude: +0.3% to $56.09/bbl
  • Gold: -0.5% to $4354.40/ozt
  • Copper: -0.5% to $5.408/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1714
  • GBP/USD: +0.1% to 1.3394
  • USD/CNH: UNCH at 7.0362
  • USD/JPY: +0.1% to 155.81
• Data out Today:
  • 8:30 ET: 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)
  • 10:30 ET: Weekly natural gas inventories (prior -177 bcf)
  • 16:00 ET: October Net Long-Term TIC Flows (prior NA)