Bond Market Update

Long End Ahead

• U.S. Treasuries are on track for a subdued start with longer tenors looking to continue this week's show of slight relative strength. Treasury futures saw very little movement during a subdued overnight session that saw reduced volume, which was expected. Japan's 30-yr yield briefly hit a fresh high for the year at 3.40% after it was confirmed that debt issuance in fiscal 2026 will reach a record of JPY29.6 trln. The overall pace of action slowed as the focus turned to Europe, where Spain's IBEX and France's CAC remain open for another hour while other markets closed already. The U.S. session is also expected to be uneventful with the market scheduled to receive only the weekly Initial Claims (Briefing.com consensus 226,000; prior 224,000) report at 8:30 ET. The U.S. Treasury will complete this week's note auction slate with a late morning sale of $44 bln in 7-yr notes ahead of an early closure at 14:00 ET. Crude oil holds a modest gain while the U.S. Dollar Index is down 0.1% at 97.86.
• Yield Check:
  • 2-yr: +1 bp to 3.54%
  • 3-yr: +1 bp to 3.59%
  • 5-yr: +1 bp to 3.74%
  • 10-yr: UNCH at 4.17%
  • 30-yr: UNCH at 4.83%

• News:
  • Rate hike expectations for the Bank of Japan have receded with the likelihood of a hike by June sitting around 57%.
  • BlackRock may abandon the Panama ports deal due to China's demand for a majority stake for its main shipping company.
  • The French parliament passed a bill to keep the government running until an agreement is made on a budget for 2026 with the original deadline just a week away.
  • Japan's November Corporate Services Price Index was up 2.7% yr/yr, as expected (last 2.7%). November Leading Index rose to 109.8 from 108.6 (expected 11.0).
  • South Korea's December Consumer Confidence fell to 109.9 from 112.4.
• Commodities:
  • WTI Crude: +0.3% to $58.55/bbl
  • Gold: +0.3% to $4518.90/ozt
  • Copper: +1.5% to $5.636/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1785
  • GBP/USD: -0.1% to 1.3502
  • USD/CNH: -0.2% to 7.0076
  • USD/JPY: -0.1% to 156.03
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -5.0%; prior -3.8%)
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 226,000; prior 224,000) and Continuing Claims (prior 1.897 mln)
  • 13:00 ET: NYSE early close
  • 14:00 ET: Treasury market early close
• Treasury Auctions:
  • 11:30 ET: $44 bln 7-yr Treasury note auction results