Bond Market Update

Trimming Recent Gains

• U.S. Treasuries are on track for a lower start after two days of gains. Treasury futures spent the night in a steady retreat that included a couple failed bounce attempts. The selling has been paced by the belly, but it has not been too aggressive. Other sovereign debt also faced overnight pressure with Japan and Australia leading to the downside amid solidifying expectations for rate hikes from the Bank of Japan and the Reserve Bank of Australia. Staying on the central bank theme, People's Bank of China Governor Pan published an op-ed in People's Daily, calling for prudent monetary policy, which represents a shift from the summer when policy was described as moderately loose. Crude oil is continuing yesterday's bounce while the U.S. Dollar Index is flat at 98.87.
• Yield Check:
  • 2-yr: +2 bps to 3.51%
  • 3-yr: +3 bps to 3.53%
  • 5-yr: +4 bps to 3.66%
  • 10-yr: +3 bps to 4.09%
  • 30-yr: +3 bps to 4.75%

• News:
  • President Trump announced a plan to loosen fuel efficiency standards for passenger vehicles.
  • Japan's 10-yr yield climbed above 1.90% to its highest level since 2007 despite a strong 30-yr JGB auction.
  • Expectations for 2026 rate hike from the Reserve Bank of Australia climbed again after the release of a strong Household Spending report.
  • The Bank of England's Decision Maker Panel left its year-ahead CPI forecast at 3.4% while the three-year outlook was increased to 3.0% from 2.9%.
  • European Central Bank policymaker Cipollone said that the governing council is making decisions on a per-meeting basis and that the economy has been resilient.
  • Australia's October trade surplus reached AUD4.385 bln (expected surplus of AUD4.440 bln; last surplus of AUD3.707 bln) as imports grew 2.0% m/m (last 1.8%) and exports rose 3.4% m/m (last 7.6%). October Household Spending was up 1.3% m/m (last 0.3%), rising 5.6% yr/yr (last 5.1%).
  • Eurozone's October Retail Sales were unchanged m/m, as expected (last 0.1%), rising 1.5% yr/yr (expected 1.4%; last 1.2%).
  • U.K.'s November Construction PMI hit 39.4 (expected 44.5; last 44.1).
  • Swiss November Unemployment Rate remained at 3.0%, as expected. November Manufacturing PMI hit 49.7 (expected 48.9; last 48.2).
• Commodities:
  • WTI Crude: +0.6% to $59.30/bbl
  • Gold: -0.2% to $4223.00/ozt
  • Copper: -0.6% to $5.35/lb
• Currencies:
  • EUR/USD: UNCH at 1.1668
  • GBP/USD: UNCH at 1.3347
  • USD/CNH: +0.2% to 7.0684
  • USD/JPY: -0.4% to 154.65
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 216,000), Continuing Claims (prior 1.960 mln), and October Trade Balance (Briefing.com consensus -$61.3 bln)
  • 10:30 ET: Weekly natural gas inventories (prior -11 bcf)