Bond Market Update

Inching Lower Ahead of CPI

• U.S. Treasuries are on track to show some weakness in early trade, though a volatile start is likely, given the looming 8:30 ET release of December CPI (Briefing.com consensus 0.3%; prior 0.2%) and Core CPI (Briefing.com consensus 0.3%; prior 0.2%). An in-line report would keep the year-over-year CPI growth rate at 2.7%, though a deceleration would be welcomed by the market. Treasury futures bore the brunt of the overnight selling near the end of the Asian session with action remaining near lows during European trade. The overnight data flow was on the light side for the second day in a row while news developments were also limited. Japan's Prime Minister Takaichi confirmed plans for a snap election in February aimed at boosting her party's standing in parliament while France's prime minister may end up forcing a 2026 budget through parliament due to an inability to reach agreement with lawmakers. The U.S. Treasury will cap this week's quick note and bond auction slate with a $22 bln 30-yr bond reopening at 13:00 ET. Crude oil is rising back above $60/bbl while the U.S. Dollar Index is up 0.2% at 99.04.
• Yield Check:
  • 2-yr: UNCH at 3.55%
  • 3-yr: +1 bp to 3.61%
  • 5-yr: UNCH at 3.77%
  • 10-yr: +1 bp to 4.20%
  • 30-yr: +1 bp to 4.85%

• News:
  • There was growing speculation that continued yen weakness could prompt the Bank of Japan to announce its next rate hike sooner than previously planned.
  • Japan's November Current Account surplus reached JPY3.14 trln (expected surplus of JPY3.04 trln; last surplus of JPY2.48 trln). December Economy Watchers Current Index dipped to 48.6 from 48.7 (expected 48.7).
  • Australia's January Westpac Consumer Sentiment was down 1.7% (last -9.0%).
  • New Zealand's Q4 NZIER Business Confidence was up 48% (last 18%).
  • France's November government budget deficit reached EUR155.4 bln (last deficit of EUR136.2 bln).
  • French Prime Minister Lecornu is reportedly considering forcing through a 2026 budget without a vote.
• Commodities:
  • WTI Crude: +2.1% to $60.74/bbl
  • Gold: -0.3% to $4598.80/ozt
  • Copper: +0.3% to $6.047/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1654
  • GBP/USD: UNCH at 1.3458
  • USD/CNH: +0.1% to 6.9720
  • USD/JPY: +0.5% to 158.86
• Data out Today:
  • 6:00 ET: December NFIB Small Business Optimism Index (actual 99.5; prior 99.0)
  • 8:30 ET: December CPI (Briefing.com consensus 0.3%; prior 0.2%) and Core CPI (Briefing.com consensus 0.3%; prior 0.2%)
  • 10:00 ET: September New Home Sales (Briefing.com consensus 710,000; prior 800,000)
  • 14:00 ET: December Treasury Budget (Briefing.com consensus -$223.0 bln; prior -$173.0 bln)
• Treasury Auctions:
  • 13:00 ET: $22 bln 30-yr Treasury bond reopening results