Bond Market Update

Selling across the Curve

• U.S. Treasuries saw some modest selling interest in the overnight trade, tried to recover early in the cash session, but then came under renewed selling pressure that pushed yields higher across the curve despite some otherwise decent results for the $58 billion 3-yr note auction. Inflation worries, rising yields in Japan, and expectations for a "hawkish cut" by the FOMC on Wednesday contributed to the selling interest.
• Yield Check:
  • 2-yr: +2 bps to 3.58%
  • 3-yr: +2 bps to 3.61%
  • 5-yr: +3 bps to 3.75%
  • 10-yr: +3 bps to 4.17%
  • 30-yr: +2 bps to 4.81%

• News:
  • Global markets are waiting on key central bank decisions this week (RBA, FOMC, SNB) and next week (BOE, ECB, and BOJ)
  • The Supreme Court could rule as soon as this month on President Trump's tariff authority as companies file lawsuits to get refunds. Washington Post
  • Elon Musk, and officials from the Trump administration criticized EU over a social media fine. Senator Ted Cruz called on President Trump to impose sanctions on EU and Mr. Musk says EU should be abolished. Fox Business
  • BLS to publish October PPI data with the November PPI news release on January 14, 2026
  • NY Fed says inflation expectations steady; consumers expect worsening financial situations and rising medical costs
  • Corporations telling investors that prices could increase in January as pre-tariff inventory runs out, according to Politico
  • Supreme Court appears ready to give President Trump more power to fire independent government officials, according to NY Times (ruling will be made in June)
  • Canada, Mexico, and the U.S. agreed to work toward renewing the existing USMCA. WSJ
  • House Speaker Mike Johnson expected to unveil Republican healthcare plan next week, while Senate will vote on a Democratic bill. Neither healthcare bill is expected to pass. Axios
  • Senate will vote on extending Affordable Care Act subsidies on Thursday, but that bill will likely fail; Senate Republicans are leaning against holding a separate vote on an alternative plan due to internal divisions, according to Politico
  • President Trump is considering ways to lower beef prices. WSJ
  • President Trump at White House event confirms that his administration will provide $12 bln in assistance to farmers from tariff revenue; says China committed to $40 billion in soybean purchases
  • JP Morgan CEO Jamie Dimon says Europe's slow bureaucracy poses an economic risk to U.S. Bloomberg
  • ECB member Schnabel suggested the ECB's next move is likely to be a rate hike but conceded that rates were unlikely to change soon
  • China's November exports 5.9% yr/yr (expected 3.8%; prior -1.1%) and imports 1.9% yr/yr (expected 2.8%; prior 1.0%)
  • Japan's Q3 GDP -0.6% qtr/qtr (expected -0.4%; last 0.5%) and -2.3% annualized (expected -1.8%; prior 2.1%); Q3 GDP Price Index 3.4% yr/yr (expected 2.8%; prior 3.3%)
• Today's Data:
  • The $58 bln 3-yr note auction was met with solid interest. The high yield of 3.614% stopped through the when-issued yield of 3.622% on dollar demand that was in line with the prior 12-auction average. The indirect bid was stronger at this auction relative to the prior 12-auction average.
• Commodities:
  • WTI crude: -2.1% to $58.84/bbl
  • Gold: -0.6% to $4216.70/ozt
  • Copper: -0.4% to $5.44/lb
• Currencies:
  • EUR/USD: flat at 1.1638
  • GBP/USD: flat at 1.3326
  • USD/CNH: flat at 7.0712
  • USD/JPY: +0.4% to 155.88
• The Day Ahead:
  • 06:00 ET: November NFIB Small Business Optimism (prior 98.2)
  • 08:30 ET: Preliminary Q3 Productivity (Briefing.com consensus: 3.5%; prior 3.3%) and Unit Labor Costs (Briefing.com consensus: 0.9%; prior 1.0%)
  • 10:00 ET: September JOLTS - Job Openings (prior 7.227M)
  • 13:00 ET $39 bln 10-yr Treasury note reopening