Bond Market Update

Longer Tenors Lead Resilient Midweek Session

• U.S. Treasuries had a resilient showing on Wednesday, as longer tenors sustained their early gains in the face of some early pressure while the short end lagged, but still finished in the green. The midweek session started with gains across the curve with lead from the long end after a positive night for sovereign debt in general. The higher open pressured the 5-yr yield back below its 50-day moving average (3.692%), though the entire complex faced some early selling in reaction to today's economic data slate, which saw a strong ISM Non-Manufacturing Index for December (54.4%; Briefing.com consensus 52.2%) outweigh a larger-than-expected decrease in Factory Orders for October (-1.3%; Briefing.com consensus -1.0%) and the Job Openings and Labor Turnover Survey for November that showed a decrease in openings to 7.146 million from a downwardly revised 7.449 million (from 7.670 million) in October. The post-data selling briefly pressured the 2-yr note into negative territory while longer tenors found support well before reaching their unchanged levels. Late-morning action saw a steady bounce that returned 10s and 30s to their opening levels while shorter tenors finished a bit behind. Crude oil fell to its lowest level in nearly three weeks while the U.S. Dollar Index edged up 0.1% to 98.68 with its 200-day moving average (98.88) looming above.
• Yield Check:
  • 2-yr: -1 bp to 3.47%
  • 3-yr: -2 bps to 3.52%
  • 5-yr: -3 bps to 3.69%
  • 10-yr: -4 bps to 4.14%
  • 30-yr: -5 bps to 4.82%

• News:
  • President Trump announced that he will implement measures to restrict large institutional investors from buying single-family homes.
  • 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%).
• Today's Data:
  • The ISM Services PMI increased to 54.4% in December (Briefing.com consensus 52.2%) from 52.6% in November. The dividing line between expansion and contraction is 50.0%, so the December reading, which was the highest reading for 2025, reflects services sector activity accelerating from the prior month.
    • The key takeaway from the report is that activity in the services sector accelerated in December to its best level for 2025, accented by the first expansion reading for the employment index since May 2025.
  • The ADP Employment Change report pointed to the addition of 41,000 nonfarm payrolls (Briefing.com consensus 45,000) in December while the November reading was revised to -29,000 from -32,000.
  • Factory orders decreased 1.3% month-over-month in October (Briefing.com consensus: -1.0%) following a 0.2% increase in September. Excluding transportation, factory orders decreased 0.2% after increasing 0.1% in September. Shipments of manufactured goods inched up 0.1% after declining 0.1% in September.
    • The key takeaway from the dated report is that it was better than the headline suggests thanks to a pickup in business spending that was reflected in the increase in new orders for nondefense capital goods excluding aircraft.
  • Job openings decreased to 7.146 million in November from a revised 7.449 million (from 7.670 million) in October.
  • The weekly MBA Mortgage Index was down 9.7% during the past two weeks after falling 5.0% two weeks ago. The Refinance Index was down 14.0% while the Purchase Index fell 6.0%.
  • Weekly crude oil inventories decreased by 3.83 million barrels after increasing by 1.93 million barrels a week ago.
• Commodities:
  • WTI crude: -2.0% to $55.99/bbl
  • Gold: -0.8% to $4462.30/ozt
  • Copper: -3.3% to $5.86/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1682
  • GBP/USD: -0.3% to 1.3465
  • USD/CNH: +0.2% to 6.9913
  • USD/JPY: +0.1% to 156.74
• The Day Ahead:
  • 8:30 ET: Preliminary Q3 Productivity (Briefing.com consensus 2.5%; prior 3.3%), preliminary Q3 Unit Labor Costs (Briefing.com consensus 0.8%; prior 1.0%), October Trade Balance (Briefing.com consensus -$61.3 bln; prior -$59.6 bln), weekly Initial Claims (Briefing.com consensus 217,000; prior 199,000), and Continuing Claims (prior 1.866 mln)
  • 10:00 ET: October Wholesale Inventories (Briefing.com consensus 0.2%; prior 0.5%)
  • 10:30 ET: Weekly natural gas inventories (prior -38 bcf)
  • 15:00 ET: November Consumer Credit (Briefing.com consensus $10.3 bln; prior $9.2 bln)