Bond Market Update

Belly Leads Monday Climb

• U.S. Treasuries began the first full week of January with an advance that pressured yields on longer tenors from their December highs while the 2-yr yield approached its December low. The Monday advance followed a weekend that featured a midnight raid by U.S. special forces to capture Venezuela's President Maduro, who was considered an illegitimate leader by over 50 countries. He was charged with narco-terrorism in a New York court and pleaded not guilty this afternoon. Treasuries began the day slightly higher after a night of gains in other sovereign debt except for JGBs, as continued weakness drove Japan's yields to fresh cycle highs. Treasuries inched up from their starting levels in morning trade, extending their gains after receiving a disappointing ISM Manufacturing Index for December (47.9%; Briefing.com consensus 48.4%; prior 48.2%), which showed a deepening contraction in activity. The market continued to fresh highs in the early afternoon, leaving the 2-yr yield just two basis points above its December low while the 30-yr yield opened above its December high, but settled near the midpoint of Friday's range. Crude oil climbed toward its 50-day moving average (58.94) while the U.S. Dollar Index fell 0.2% to 98.26.
• Yield Check:
  • 2-yr: -2 bps to 3.46%
  • 3-yr: -3 bps to 3.52%
  • 5-yr: -3 bps to 3.71%
  • 10-yr: -2 bps to 4.17%
  • 30-yr: -1 bp to 4.85%

• News:
  • The Atlanta Fed lowered its GDPNow forecast for Q4 GDP to 2.7% from 3.0%.
  • The U.S. Treasury announced that the global minimum tax agreement with OECD has been finalized.
  • OPEC+ made no changes to its production plans at this Sunday's meeting, which had been expected.
  • President Trump repeated that he plans to travel to China in April.
  • Goldman Sachs expects China's GDP to grow about 4.8% in 2026.
  • China's December RatingDog Services PMI hit 52.0, as expected (last 52.1).
  • Japan's December Manufacturing PMI hit 50.0 (expected 49.7; last 48.7).
  • Singapore's November Retail Sales were unchanged m/m (last 2.3%), rising 6.3% yr/yr (last 4.4%).
  • U.K.'s November BoE Consumer Credit reached GBP2.077 bln (last GBP1.713 bln). November Mortgage Lending reached GBP4.49 bln (expected GBP4.80 bln; last GBP4.16 bln) and November Net Lending to Individuals reached GBP6.60 bln (expected GBP5.20 bln; last GBP5.40 bln).
  • Spain's December Unemployment decreased by 16,300 (expected 5,700; last -18,800).
  • Swiss November Retail Sales rose 2.3% yr/yr (expected 2.5%; last 2.2%). December Manufacturing PMI hit 45.8 (expected 49.9; last 49.7).
• Today's Data:
  • The ISM Manufacturing Index checked in at 47.9% for December (Briefing.com consensus: 48.4%), down from 48.2% in November. The dividing line between expansion and contraction is 50.0%, so the December figure, which is the tenth straight month below 50.0%, suggests manufacturing activity contracted at a faster pace than the prior month.
    • The key takeaway from the report is that the manufacturing sector operated in a state of contraction for the tenth consecutive month, with tariffs and weaker order activity cited as key drags on overall activity.
• Commodities:
  • WTI crude: +1.7% to $58.32/bbl
  • Gold: +2.8% to $4452.10/ozt
  • Copper: +5.1% to $5.98/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1727
  • GBP/USD: +0.7% to 1.3543
  • USD/CNH: +0.3% to 6.9855
  • USD/JPY: -0.4% to 156.22
• The Day Ahead:
  • 9:45 ET: Final December S&P Global U.S. Services PMI (flash 52.9; November 54.1)