Bond Market Update

Longer Tenors Trim Monday Gains

• U.S. Treasuries continued their quiet start to the week with a shallow Tuesday dip that narrowed Monday's gains in the belly of the curve. Once again, the Tuesday session was quiet in terms of economic data and news developments, which left the market inside a narrow range. Treasuries started the day with slim losses before embarking on a slow rebound into the late morning with the short end leading the way. The 2-yr note made it into positive territory in the late morning, defending its slim gain into the close. Longer tenors also bounced from their starting levels, but they found resistance near their flat lines. U.S. equity markets navigated a narrow range while metals bounced from Monday's sharp slide with silver and copper showing the most resilience. The FOMC released the Minutes from its December meeting in the afternoon, showing that most policymakers expect to see more rate cuts if inflation continues decelerating, though some officials would like to see the current level of rates remaining in place for some time. Crude oil dipped while the U.S. Dollar Index rose 0.2% to 98.23. Tomorrow's session will end an hour early while NYSE will be open for a full session.
• Yield Check:
  • 2-yr: -1 bp to 3.45%
  • 3-yr: UNCH at 3.51%
  • 5-yr: +1 bp to 3.68%
  • 10-yr: +1 bp to 4.13%
  • 30-yr: +1 bp to 4.81%

• News:
  • Markets in Japan, South Korea, Germany, Switzerland, and Italy will be closed entirely tomorrow while markets in Australia, New Zealand, Hong Kong, France, Spain, and the U.K. will close early.
  • Samsung and SK Hynix received U.S. approval to ship chip fabrication tools to China and there were reports that the U.S. may implement an annual system for granting these licenses.
  • South Korea's finance ministry is expected to present a roadmap for the country's inclusion in the MSCI Developed Market Index early next year.
  • Sweden's Riksbank noted in its Minutes from the December meeting that policy should remain at its current level for some time, echoing the European Central Bank's view.
  • South Korea's November Industrial Production was up 0.6% m/m (expected 2.2%; last -4.2%) but down 1.4% yr/yr (expected 3.0%; last -8.2%). November Retail Sales fell 3.3% m/m (last 3.6%) and November Service Sector Output was up 0.7% m/m (last -0.7%).
  • Spain's December CPI was up 0.3% m/m (last 0.2%), rising 2.9% yr/yr (expected 2.8%; last 3.0%). December Core CPI was up 2.6% yr/yr (last 2.6%). November Retail Sales rose 6.0% yr/yr (last 3.9%) and October Current Account surplus reached EUR7.18 bln (last surplus of EUR1.87 bln).
  • Swiss December KOF Leading Indicators rose to 103.4 from 101.7 (expected 101.5).
• Today's Data:
  • The Chicago PMI hit 43.5 in December (Briefing.com consensus 40.4), up from 36.3 in November.
  • The FHFA Housing Price Index was up 0.4% month-over-month in October (Briefing.com consensus 0.1%) after decreasing a revised 0.1% (from 0.0%) in September.
  • The S&P Case-Shiller Home Price Index was up 1.3% year-over-year in October (Briefing.com consensus 1.1%), down from 1.4% in September.
• Commodities:
  • WTI crude: -0.3% to $57.94/bbl
  • Gold: +0.9% to $4386.30/ozt
  • Copper: +3.8% to $5.78/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1746
  • GBP/USD: -0.3% to 1.3464
  • USD/CNH: -0.1% to 6.9914
  • USD/JPY: +0.3% to 156.48
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -5.0%)
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 226,000; prior 214,000) and Continuing Claims (prior 1.923 mln)
  • 10:30 ET: Weekly crude oil inventories (prior 0.4 mln)
  • 12:00 ET: Weekly natural gas inventories (prior -166 bcf)
  • 14:00 ET: Treasury market early close