Bond Market Update

Longer Tenors Show Early Strength

• U.S. Treasuries are on track for a higher start with the long end set to lead out of the gate after outperforming on Tuesday. Treasury futures began inching higher in early evening trade, staying on a steady upward path into the night. The market reached highs not long ago, climbing alongside other sovereign debt while global equities have been mixed. Economic data released overnight included eurozone's flash CPI for December, which showed a deceleration in the year-over-year rate to 2.0% from 2.1%. The U.S. session will feature a handful of reports this morning, including ISM Non-Manufacturing Index for December (Briefing.com consensus 52.2%; prior 52.6%) at 10:00 ET. Crude oil is slipping to $57/bbl while the U.S. Dollar Index is little changed at 98.62.
• Yield Check:
  • 2-yr: -2 bps to 3.46%
  • 3-yr: -3 bps to 3.51%
  • 5-yr: -3 bps to 3.69%
  • 10-yr: -4 bps to 4.14%
  • 30-yr: -4 bps to 4.83%

• News:
  • South Korea's President Lee cautioned against an unnecessary confrontation with China, adding that the restoration of trust is most important. He also said that South Korea's relations with Japan are as important as those with China.
  • Baidu's chip unit is looking to raise up to $2 bln through its IPO.
  • Shipping giant Maersk said that intra-Asia freight volumes have increased while traffic at Europe's major ports has been hampered by severe winter weather.
  • China's December FX Reserves reached $3.358 trln (last $3.346 trln).
  • Japan's December Services PMI hit 51.6 (expected 52.5; last 53.2).
  • Australia's November Building Approvals were up 15.2% m/m (expected 1.9%; last -6.1%), rising 20.2% yr/yr (last -1.1%). November Private House Approvals were up 1.3% m/m (last -1.3%). November CPI Indicator slowed to 3.4% from 3.8% (expected 3.6%).
  • India's 2025 GDP expanded 7.4% (last 6.5%).
  • Eurozone's flash December CPI was up 0.2% m/m (last -0.3%), rising 2.0% yr/yr, as expected (last 2.1%). Flash December Core CPI was up 0.3% m/m (last -0.3%), rising 2.3% yr/yr (expected 2.4%; last 2.4%).
  • Germany's November Retail Sales were down 0.6% m/m (expected 0.2%; last 0.3%) but up 1.1% yr/yr (last 2.1%). December Unemployment increased by 3,000 (expected 5,000; last 1,000) while December Unemployment Rate remained at 6.3%, as expected.
  • U.K.'s Q3 Housing Equity Withdrawal reached GBP10.9 bln (expected GBP8.7 bln; last GBP17.9 bln).
  • France's December Consumer Confidence rose to 90 from 89, as expected.
  • Italy's December CPI was up 0.2% m/m, as expected (last 0.2%), rising 1.2% yr/yr (expected 1.1%, last 1.1%).
• Commodities:
  • WTI Crude: -0.2% to $57.00/bbl
  • Gold: -0.8% to $4460.50/ozt
  • Copper: -1.5% to $5.971/lb
• Currencies:
  • EUR/USD: UNCH at 1.1685
  • GBP/USD: -0.1% to 1.3490
  • USD/CNH: +0.1% to 6.9875
  • USD/JPY: -0.1% to 156.52
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -10.0%; prior -5.0%)
  • 8:15 ET: December ADP Employment Change (Briefing.com consensus 45,000; prior -32,000)
  • 10:00 ET: December ISM Non-Manufacturing Index (Briefing.com consensus 52.2%; prior 52.6%), November Factory Orders (Briefing.com consensus -1.0%; prior NA), November job openings (prior 7.670 mln), and November Business Inventories (prior NA)
  • 10:30 ET: Weekly crude oil inventories (prior 1.93 mln)