Bond Market Update

Divergence on Display

• U.S. Treasuries have seen some divergence since this morning's release of the December jobs report with the 2-yr note sliding to a fresh low while the long bond has climbed to a fresh high. The entire complex was back near today's starting levels about two hours after the open, but the market has diverged since with 2s slipping in steady fashion while the long bond has climbed just as steadily. The underperformance up front comes as the market reconsiders its rate cut expectations. The fed funds futures market was pricing in the next cut for April, but expectations for the next cut have now been pushed to June. This makes for a notable shift from one week ago, when the market speculated that the next cut could come as soon as March. On a side note, the Supreme Court opined today, but not regarding tariffs. The Court will release its next opinion on January 14, but the subject will not be known until that day.
• Yield Check:
  • 2-yr: +4 bps to 3.53%
  • 3-yr: +4 bps to 3.59%
  • 5-yr: +2 bps to 3.76%
  • 10-yr: -1 bp to 4.17%
  • 30-yr: -4 bps to 4.82%