Bond Market Update

Extending Monday Losses

• U.S. Treasuries are on track for a modestly lower start in longer tenors while the short end is expected to show some early relative strength after outperforming yesterday. Treasury futures spent the first half of the night in a sideways range, giving in to some downside pressure that showed up once the focus shifted to action in Europe. European equities are having a good showing while sovereign debt is facing some light pressure. Economic data released overnight showed a slightly hotter than expected year-over-year reading of the eurozone's CPI for November (2.2%; expected 2.1%), but the core reading (2.4%) matched expectations. The U.S. session, however, will not see any data today. Crude oil holds a modest loss near $59/bbl while the U.S. Dollar Index is flat at 99.41.
• Yield Check:
  • 2-yr: UNCH at 3.54%
  • 3-yr: +1 bp to 3.56%
  • 5-yr: +2 bps to 3.69%
  • 10-yr: +1 bp to 4.11%
  • 30-yr: +2 bps to 4.76%

• News:
  • U.S. officials confirmed that South Korea's tariff rate has been reduced to 15%.
  • China Securities Journal reported that local Chinese governments are buying stakes in listed companies.
  • British investors have some concerns that the budget plan that was announced last week will not be realized since it would require additional cuts leading into elections expected in 2029.
  • The Bank of England lowered the systematic capital buffer to 13% from 14% after the latest round of bank stress tests. The Countercyclical Capital Buffer was maintained at 2%.
  • European Central Bank policymaker Kocher said that slight inflationary or disinflationary deviations from target should not trigger policy changes, echoing recent comments from officials that policy is in a good place.
  • Japan's November Monetary Base was down 8.5% yr/yr, as expected (last -7.8%) and November Household Confidence rose to 37.5 from 35.8 (expected 36.2). 
  • South Korea's November CPI was down 0.2% m/m (expected -0.3%; last 0.3%) but up 2.4% yr/yr (last 2.4%).
  • Australia's October Building Approvals fell 6.4% m/m (expected -4.3%; last 11.1%), dropping 1.8% yr/yr (expected 12.4%; last 14.9%). Q3 Current Account deficit reached AUD16.6 bln (expected deficit of AUD13.2 bln; last deficit of AUD16.2 bln). Q3 Net Exports Contribution decreased 0.1% qtr/qtr (last 0.1%). October Private House Approvals were down 2.1% (last 3.2%).
  • New Zealand's Q3 Terms of Trade Index fell 2.1% qtr/qtr (expected 0.3%; last 4.2%).
  • Eurozone's flash November CPI was down 0.3% m/m (last 0.2%) but up 2.2% yr/yr (expected 2.1%; last 2.1%). November Core CPI was down 0.5% m/m (last 0.3%), rising 2.4% yr/yr, as expected (last 2.4%). October Unemployment Rate remained at 6.4% (expected 6.3%).
  • U.K.'s November Nationwide HPI was up 0.3% m/m (expected 0.0%; last 0.2%), rising 1.8% yr/yr (expected 1.4%; last 2.4%).
  • France's October government budget hit a deficit of EUR136.2 bln (last deficit of EUR155.4 bln).
  • Spain's November Unemployment decreased by 18,800 (expected -12,400; last 22,100).
  • Italy's October Unemployment Rate fell to 6.0% from 6.2% (expected 6.1%). October PPI was down 0.2% m/m (last 0.2%), rising 0.1% yr/yr (last 1.1%).
• Commodities:
  • WTI Crude: -0.2% to $59.18/bbl
  • Gold: -0.9% to $4236.50/ozt
  • Copper: -0.5% to $5.276/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1618
  • GBP/USD: UNCH at 1.3210
  • USD/CNH: UNCH at 7.0682
  • USD/JPY: +0.4% to 156.01
• No Data on Today's Schedule