Bond Market Update

Waiting on the Fed

• U.S. Treasuries saw little movement in the overnight trade, which featured a decent 5-yr JGB auction, a unanimous vote by the RBA to leave its cash rate unchanged at 3.60%, and a contention by RBA Governor Bullock that rate hikes would need to be considered if inflation remains persistent. Seems like an appropriate precursor to what is expected to be a "hawkish cut" by the FOMC on Wednesday. The specter of that decision, and the updated Summary of Economic Projections, has curtailed trading volume ahead of it. The NFIB Small Business Optimism Index for November increased to 99.0 from 98.2. The results of the $39 billion 10-yr note reopening will be released at 1:00 p.m. ET.
• Yield Check:
  • 2-yr: +1 bp to 3.59%
  • 3-yr: +1 bp to 3.62%
  • 5-yr: unch at 3.75%
  • 10-yr: unch at 4.17%
  • 30-yr: -1 bp to 4.80%

• News:
  • Ukraine President Volodymyr Zelensky rules out ceding territory, which is a key part of President Trump's peace plan. Washington Post
  • President Trump, in an interview, was highly critical of Europe and said he could make additional tariff changes to help lower prices. Politico
  • The Reserve Bank of Australia voted unanimously to leave its cash rate unchanged at 3.60%, as expected; however, it was a more hawkish-minded decision, as RBA Governor Bullock reportedly said in the Q&A that rate hikes would need to be considered if inflation remains persistent
  • The House will vote on the defense funding bill on Wednesday. Politico
  • Japan's Finance Minister Katayama conveyed an intervention-minded tone, saying the action in the bond market is being closely monitored and that FX moves are concerning.
  • The Bank of Korea, aiming to stabilize rising rates, is making its first bond purchase since 2022.
  • China's President Xi talked up the idea of reinforcing growth momentum, while President Trump said he is going to allow NVIDIA to ship its H200 chips to approved customers in China, with 25% of any sales going to the U.S.
  • France has a key vote today on its social security budget
  • The UK registered some relatively weak retail sales heading into the holiday season
• Commodities:
  • WTI crude: +0.5% to $59.16/bbl
  • Gold: +0.3% to $4230.40/ozt
  • Copper: -1.4% to $5.37/lb
• Currencies:
  • EUR/USD: flat at 1.1636
  • GBP/USD: flat at 1.3319
  • USD/CNH: -0.1% to 7.0655
  • USD/JPY: +0.3% to 156.29
• The Day Ahead:
  • 06:00 ET: November NFIB Small Business Optimism (actual 99.0; prior 98.2)
  • 13:00 ET: $39 bln 10-yr Treasury note reopening

(Editor's note: Comment has been updated to remove the inclusion of the Q3 productivity and September JOLTs reports, which are not being released today.)