Bond Market Update

Long End Leads Amid Monday News Storm

• U.S. Treasuries started the week on a modestly higher note with the 10-yr note finishing a bit ahead of other tenors. The Monday advance was subdued despite a busy overnight session that featured a continuation of a record rally in gold and silver and speculation about an imminent intervention to boost the yen. The speculation was fueled by news that the New York Fed conducted rate checks with banks, a typical early step in the intervention process, and comments from Japan's Prime Minister Takaichi, who hinted at an intervention during a televised debate on Sunday. There was also a sudden jump in the likelihood for another partial U.S. government shutdown on Friday after Senate Minority Leader Schumer said that a spending bill will be blocked if it is attached to funding for the Department of Homeland Security. The higher start met some early resistance after the market received a stellar Durable Orders report for November (5.3%; Briefing.com consensus 1.1%), but Treasuries showed resilience, rising past their starting highs in mid-morning trade. Longer tenors maintained their lead into the close while the 2-yr note received a midday boost from a strong auction that kept the short end in the green. Crude oil slipped to the midpoint of its range from Friday while the U.S. Dollar Index fell 0.5% to 97.09, reaching its lowest level since late September.
• Yield Check:
  • 2-yr: -1 bp to 3.59%
  • 3-yr: -2 bps to 3.65%
  • 5-yr: -2 bps to 3.82%
  • 10-yr: -3 bps to 4.21%
  • 30-yr: -3 bps to 4.81%

• News:
  • The Atlanta Fed left its GDPNow forecast for Q4 GDP at 5.4% in its latest update.
  • China's President Xi removed one of PLA's top generals.
  • India is planning to sign a trade deal with the EU tomorrow.
  • French Prime Minister Lecornu forced a spending bill for 2026 through parliament without a vote.
  • France will preside over a call between G-7 finance ministers tomorrow.
  • Ukraine's president said that a security agreement with the U.S. is ready.
  • Japan's November Leading Index ticked up to 109.9 from 109.8 (expected 110.5) and Coincident Indicator decreased 1.0% m/m (expected -0.7%; last -1.3%).
  • Singapore's December Industrial Production fell 13.3% m/m (expected -15.2%; last -7.8%) but was up 8.3% yr/yr (expected 10.1%; last 18.2%).
  • Germany's January ifo Business Climate Index remained at 87.6 (expected 88.3; last 87.6). January Current Assessment ticked up to 85.7 from 85.6 and Business Expectations dipped to 89.5 from 89.7.
  • Spain's December PPI was down 3.0% yr/yr (last -2.5%).
• Today's Data:
  • Durable goods orders jumped 5.3% month-over-month in November (Briefing.com consensus: 1.1%) following an upwardly revised 2.1% decline (from -2.2%) for October. Excluding transportation, durable goods orders rose 0.5% month-over-month (Briefing.com consensus: 0.3%) following a downwardly revised 0.1% increase (from 0.2%) for October.
    • The key takeaway from the report is that it showed good business spending activity, evidenced by the 0.7% month-over-month jump in nondefense capital goods orders excluding aircraft.
  • $69 bln 2-year Treasury note auction results (prior 12-auction average):
    • High yield: 3.580% (3.794%).
    • Bid-to-cover: 2.75 (2.60).
    • Indirect bid: 64.4% (61.8%).
    • Direct bid: 28.3% (26.9%).
• Commodities:
  • WTI crude: -0.7% to $60.63/bbl
  • Gold: +2.0% to $5081.40/ozt
  • Copper: +1.2% to $6.02/lb
• Currencies:
  • EUR/USD: +0.5% to 1.1882
  • GBP/USD: +0.4% to 1.3683
  • USD/CNH: +0.1% to 6.9501
  • USD/JPY: -1.1% to 153.94
• The Day Ahead:
  • 9:00 ET: November FHFA Housing Price Index (Briefing.com consensus 0.3%; prior 0.4%) and November S&P Case-Shiller Home Price Index (Briefing.com consensus 1.2%; prior 1.3%)
  • 10:00 ET: January Consumer Confidence (Briefing.com consensus 90.0; prior 89.1)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results