Bond Market Update

Long End Lags

• U.S. Treasuries are on track for a lower start with the long bond expected to show some relative weakness in the early going. Treasury futures faced two overnight waves of selling with the first one following the Bank of Japan's long-awaited rate hike announcement. The central bank raised its policy rate to a 30-year high of 0.75% in a unanimous vote, but Governor Ueda did not sound particularly hawkish, which sent the yen toward its November low against the dollar. Treasury futures faced a bit more selling at the start of the European session, slipping alongside other sovereign debt while equity markets in Europe are little changed. On the home front, CNBC reported this morning that Fed Governor Waller's interview for the Fed Chairman nomination went well and that Blackrock CIO Rieder will be interviewed before the end of the year. Fed Governor Bowman is no longer being considered. Crude oil holds a slim gain above $56/bbl while the U.S. Dollar Index is up 0.3% at 98.70.
• Yield Check:
  • 2-yr: +1 bp to 3.47%
  • 3-yr: +1 bp to 3.51%
  • 5-yr: +2 bps to 3.68%
  • 10-yr: +2 bps to 4.14%
  • 30-yr: +3 bps to 4.83%

• News:
  • Chinese press speculated that the People's Bank of China is preparing to lower its reserve requirement ratio in January.
  • Fitch affirmed New Zealand's AA+ rating, observing that gradual recovery has hampered fiscal consolidation. 
  • The EU agreed to provide an EUR90 bln loan to Ukraine but could not agree on spending frozen Russian assets.
  • European Central Bank officials appear comfortable with the current level of rates while Goldman Sachs expects the Bank of England to cut its bank rate three times in 2026. 
  • China's November FDI was down 7.5% YTD (last -10.3%).
  • Japan's November National CPI was up 0.4% m/m (last 0.4%), rising 2.9% yr/yr (last 3.0%). National Core CPI was up 3.0% yr/yr, as expected (last 3.0%).
  • South Korea's November PPI rose 0.3% m/m (last 0.2%), increasing 1.9% yr/yr (last 1.5%).
  • Australia's November Private Sector Credit rose 0.6% m/m, as expected (last 0.7%) and Housing Credit also rose 0.6% m/m (last 0.6%). November Commodity Prices were down 3.8% yr/yr (last -1.7%).
  • New Zealand's November trade deficit reached NZD163 mln (expected deficit of NZD1.175 bln; last deficit of NZD1.598 bln). November Credit Card Spending was up 4.7% yr/yr (last 1.6%) and December ANZ Business Confidence rose to 73.6 from 67.1.
  • Eurozone's October Current Account surplus reached EUR25.7 bln (expected surplus of EUR16.0 bln; last surplus of EUR23.1 bln).
  • Germany's November PPI was unchanged m/m (expected 0.1%; last 0.1%), falling 2.3% yr/yr (expected -2.2%; last -1.8%). January GfK Consumer Climate fell to -26.9 from -23.4 (expected -23.0).
  • U.K.'s November Retail Sales dipped 0.1% m/m (expected 0.3%; last -0.9%) but were up 0.6% yr/yr (expected 1.6%; last 0.6%). November Core Retail Sales dipped 0.2% m/m (expected 0.2%; last -0.8%) but were up 1.2% yr/yr (expected 1.6%; last 1.6%). November Public Sector Net Borrowing was down GBP11.65 bln (expected -GBP10.20 bln; last -GBP21.19 bln). December CBI Distributive Trades Survey fell to -44 from -32 (expected -29).
  • France's November PPI was up 1.1% m/m (last 0.0%), but down 3.3% yr/yr (last -0.8%).
  • Italy's December Business Confidence fell to 88.4 from 89.5 (expected 89.3) and Consumer Confidence rose to 96.6 from 95.0 (expected 96.0). October Industrial Sales fell 0.5% m/m (last 1.9%) but were up 1.7% yr/yr (last 3.4%).
• Commodities:
  • WTI Crude: +0.5% to $56.44/bbl 
  • Gold: -0.2% to $4354.30/ozt
  • Copper: +1.4% to $5.513/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1708
  • GBP/USD: -0.1% to 1.3370
  • USD/CNH: +0.1% to 7.0363
  • USD/JPY: +1.2% to 157.23
• Data out Today:
  • 10:00 ET: 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)