Bond Market Update

Quiet Finish to Christmas Week

• U.S. Treasuries finished the Christmas-shortened week on a mixed note, but the Friday session was uneventful, to no one's surprise. The trading day started with slim gains after a night that lacked the participation of some markets in Asia and all major European bourses. Treasuries added to their starting gains in early action but ran into resistance once the 30-yr yield dipped below its 200-day moving average (4.788%) while the 5-yr yield approached its 50-day moving average (3.674%). Treasuries remained just below their highs through early morning trade but slipped below their starting levels shortly before noon. However, the dip did not invite additional selling, as the complex nestled into a sideways range again, hovering near session lows into the close. The equity session was also a sleepy one, but precious metals had a big day with gold and silver soaring to fresh records. Silver jumped nearly $6/ozt past $77/ozt, extending this week's gain to about $10/ozt, while palladium also enjoyed a big rally, soaring $225/ozt past $2000/ozt to its best close in more than three years. Crude oil gave back some of this week's gain while the U.S. Dollar Index rose 0.1% to 98.05, narrowing this week's loss to 0.7%.
• Yield Check:
  • 2-yr: -3 bps to 3.48% (-1 bp this week)
  • 3-yr: -3 bps to 3.53% (UNCH this week)
  • 5-yr: -2 bps to 3.70% (+1 bp this week)
  • 10-yr: UNCH at 4.14% (-1 bp this week)
  • 30-yr: +2 bps to 4.82% (-1 bp this week)

• 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: -3.0% to $56.68/bbl
  • Gold: +1.0% to $4551.30/ozt
  • Copper: +5.0% to $5.85/lb
• Currencies:
  • EUR/USD: UNCH at 1.1779
  • GBP/USD: -0.1% to 1.3505
  • USD/CNH: +0.1% to 7.0035
  • USD/JPY: +0.4% to 156.45
• The Week Ahead:
  • Monday: November Pending Home Sales (Briefing.com consensus 0.9%; prior 1.9%) at 10:00 ET; weekly crude oil inventories (prior -1.27 mln) at 10:30 ET; and weekly natural gas inventories (prior -167 bcf) at 12:00 ET
  • Tuesday: October FHFA Housing Price Index (Briefing.com consensus 0.1%; prior 0.0%) and October S&P Case-Shiller Home Price Index (Briefing.com consensus 1.1%; prior 1.4%) at 9:00 ET; December Chicago PMI (Briefing.com consensus 40.4; prior 36.3) at 9:45 ET; December Consumer Confidence (prior 88.7) and October Job Openings (prior 7.227 mln) at 10:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -5.0%) at 7:00 ET; weekly crude oil inventories (prior NA) at 10:30 ET; and weekly natural gas inventories (prior NA) at 12:00 ET
  • Thursday: Weekly Initial Claims (Briefing.com consensus 226,000; prior 214,000) and Continuing Claims (prior 1.923 mln) at 8:30 ET
  • Friday: Final December S&P Global U.S. Manufacturing PMI (prior 51.8) at 9:45 ET and November Construction Spending (Briefing.com consensus -0.1%; prior NA) at 10:00 ET