Bond Market Update

Long End Ahead

• U.S. Treasuries are on track for a modestly higher start with longer tenors expected to show some relative strength in the early going. Treasury futures spent the first half of the night in a sideways range, but they rallied to highs once the focus shifted to Europe's return from last week's Christmas closures. The gains in Treasuries have been accompanied by some strength in other sovereign debt while most equity markets have been confined to narrow ranges. South Korea's Kospi (+2.2%) outperformed, returning to its record from November. The overall news flow has been on the light side with the market focusing on the growing likelihood of a peace deal being reached between Russia and Ukraine. Precious metals have seen some early volatility after last week's strength while crude oil has reclaimed the bulk of its loss from Friday. The U.S. Dollar Index is up 0.1% at 98.11.
• Yield Check:
  • 2-yr: UNCH at 3.48%
  • 3-yr: UNCH at 3.53%
  • 5-yr: -1 bp to 3.69%
  • 10-yr: -2 bps to 4.12%
  • 30-yr: -2 bps to 4.80%

• News:
  • The Bank of Japan released its summary of opinions from the December meeting, with some policymakers believing that steady rate hikes are needed to avoid falling behind the curve.
  • China's November Industrial Profit was up 0.1% YTD (last 1.9%).
  • Hong Kong's November trade deficit reached HKD48.5 bln (last deficit of HKD39.9 bln) as imports grew 18.1% m/m (last 18.3%) and exports rose 18.8% m/m (last 17.5%).
  • India's November Industrial Production was up 6.7% yr/yr (expected 2.5%; last 0.5%) and Manufacturing Output was up 8.0% m/m (last 2.0%).
  • France's November jobseeker total dipped to 3.129 mln from 3.151 mln.
• Commodities:
  • WTI Crude: +2.5% to $58.13/bbl
  • Gold: -1.5% to $4482.70/ozt
  • Copper: -3.7% to $5.622/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1761
  • GBP/USD: -0.1% to 1.3479
  • USD/CNH: UNCH at 7.0031
  • USD/JPY: -0.2% to 156.31
• Data out Today:
  • 10:00 ET: November Pending Home Sales (Briefing.com consensus 0.9%; prior 1.9%)
  • 10:30 ET: Weekly crude oil inventories (prior -1.27 mln)
  • 12:00 ET: Weekly natural gas inventories (prior -167 bcf)