Bond Market Update

Inching Higher After Christmas Break

• U.S. Treasuries are on track for a quiet start to the post-Christmas session with shorter tenors expected to show some relative strength in the early going. Treasury futures faced some pressure during the Asian session that lacked the participation of markets in Australia, New Zealand, and Hong Kong, but the slim losses were wiped out shortly after the focus turned to Europe, where all major markets are closed. The early selling in Treasury futures took place alongside weakness in JGBs with Japan's 2-yr yield hitting its highest level since 1996 even though Tokyo Core CPI decelerated to 2.3% yr/yr in December from 2.8% in November. The market did not receive any data from Europe, and the U.S. economic calendar is also empty today. Crude oil hovers near $58.50/bbl while the U.S. Dollar Index is up 0.1% at 98.04.
• Yield Check:
  • 2-yr: -1 bp to 3.50%
  • 3-yr: -1 bp to 3.55%
  • 5-yr: -1 bp to 3.71%
  • 10-yr: -1 bp to 4.13%
  • 30-yr: UNCH at 4.80%

• News:
  • Japan's cabinet confirmed a record FY26 budget of JPY122.3 trln.
  • State-owned banks in China are reportedly actively purchasing dollars in the spot market.
  • Ukraine's President Zelensky is expected to visit Florida in the coming days to discuss the proposed peace plan.
  • Japan's November Housing Starts were down 8.5% yr/yr (expected 0.2%; last 3.2%) and Construction Orders rose 9.5% yr/yr (last -10.1%). November Industrial Production fell 2.6% m/m (expected -1.9%; last 1.5%) and November Retail Sales rose 1.0% yr/yr (expected 0.9%; last 1.7%). November Unemployment Rate remained at 2.6%, as expected. December Tokyo CPI was up 2.0% yr/yr (last 2.7%) and Tokyo Core CPI was up 2.3% yr/yr (expected 2.5%; last 2.8%).
  • Singapore's November Industrial Production fell 10.2% m/m (last 11.2%) but was up 14.3% yr/yr (expected 14.2%; last 28.9%).
• Commodities:
  • WTI Crude: +0.1% to $58.41/bbl
  • Gold: +0.9% to $4542.60/ozt
  • Copper: +2.9% to $5.736/lb
• Currencies:
  • EUR/USD: UNCH at 1.1777
  • GBP/USD: -0.2% to 1.3494
  • USD/CNH: +0.1% to 7.0043
  • USD/JPY: +0.4% to 156.45
• No Data on Today's Schedule