Bond Market Update

Long End Lags

• U.S. Treasuries are on track for a lower start with the long bond expected to show some early relative weakness after underperforming on Monday. Treasury futures began seeing pressure in early evening trade, slipping to fresh lows shortly after the focus turned to action in Europe. The market attempted a bounce in the middle of the night, but that effort found resistance. Overnight trade saw the release of final Services PMI readings from major economies. While the readings reflected growth in activity, some were weaker than expected. The U.S. Services PMI will come out at 9:45 ET and it will be today's lone economic release. Crude oil holds a modest gain while the U.S. Dollar Index is up 0.2% at 98.47.
• Yield Check:
  • 2-yr: +1 bp to 3.47%
  • 3-yr: +2 bps to 3.54%
  • 5-yr: +1 bp to 3.72%
  • 10-yr: +1 bp to 4.18%
  • 30-yr: +3 bps to 4.88%

• News:
  • The People's Bank of China said that monetary policy will be maintained at an appropriately loose level with reserve requirement ratio cuts and interest rate cut flexibility this year.
  • The Chinese government has reportedly started selling local government bonds to increase investment.
  • China's Ministry of Commerce will tighten control over exports of dual-use items to Japan.
  • Japan's December Monetary Base was down 9.8% yr/yr (expected -8.0%; last -8.7%).
  • Hong Kong's December Manufacturing PMI hit 51.9 (last 52.9).
  • India's December Services PMI hit 58.0 (expected 59.1; last 59.8).
  • Australia's December Services PMI hit 51.1 (expected 51.0; last 52.8).
  • Eurozone's final December Services PMI hit 52.4 (expected 52.6; last 53.6).
  • Germany's final December Services PMI hit 52.7 (expected 52.6; last 53.1).
  • U.K.'s final December Services PMI hit 51.4 (expected 52.1; last 51.3).
  • France's flash December CPI was up 0.1% m/m (expected 0.2%; last -0.2%), rising 0.8% yr/yr (expected 0.9%; last 0.9%). Final December Services PMI hit 50.1 (expected 50.2; last 51.4).
  • Italy's final December Services PMI hit 51.5 (expected 54.2; last 55.0).
  • Spain's final December Services PMI hit 57.1 (expected 54.8; last 55.6).
• Commodities:
  • WTI Crude: +0.2% to $58.43/bbl
  • Gold: +0.5% to $4471.80/ozt
  • Copper: +0.7% to $6.018/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1698
  • GBP/USD: -0.2% to 1.3509
  • USD/CNH: UNCH at 6.9793
  • USD/JPY: +0.1% to 156.50
• Data out Today:
  • 9:45 ET: Final December S&P Global U.S. Services PMI (flash 52.9; November 54.1)