Bond Market Update

Sliding Rate Cut Odds Weigh

• U.S. Treasuries finished a bumpy abbreviated week with losses across the curve after sliding from their opening highs. The trading day started with gains across the curve after a night that saw selling in global equities and most sovereign debt. British gilts underperformed notably amid growing speculation that Chancellor Reeves will not longer call for a higher income tax in her Autumn budget statement, but the prospect of other tax hikes remains. Treasuries began sliding from their starting levels immediately after the open, remaining pressured into the afternoon. The slide lifted yields on all tenors back above their respective 50-day moving averages with the 30-yr yield also rising past its prior November high to a level not seen since early October. There was some additional pressure on rate cut expectations with the implied likelihood sliding below the 50.0% threshold after Kansas City Fed President (FOMC voter) Schmid said that he is leaning against a December rate cut shortly after Minneapolis Fed President (2026 voter) Kashkari said that he did not support the October cut and is not sure about December. Crude oil climbed, turning slightly positive for the week (+$0.35/bbl), while the U.S. Dollar Index rose 0.2% to 99.30, trimming this week's loss to 0.3%.
• Yield Check:
  • 2-yr: +2 bps to 3.61% (+5 bps this week)
  • 3-yr: +3 bps to 3.62% (+5 bps this week)
  • 5-yr: +3 bps to 3.74% (+6 bps this week)
  • 10-yr: +4 bps to 4.15% (+6 bps this week)
  • 30-yr: +5 bps to 4.75% (+5 bps this week)

• News:
  • National Economic Council Director Hassett said that a partial release of the October jobs report is being planned and that the full September jobs report could be released next week.
  • The Trump administration is planning some tariff exemptions aimed at easing food inflation, according to The New York Times.
  • Officials from South Korea and the U.S. officially signed the trade and investment deal.
  • Germany's budget committee approved 2026 spending of EUR524.5 bln and nearly EUR100 bln in borrowing.
  • China's October Fixed Asset Investment was down 1.7% yr/yr (expected -0.9%; last -0.5%), October Industrial Production rose 4.9% yr/yr (expected 5.5%; last 6.5%), October Retail Sales increased 2.9% yr/yr (expected 2.7%; last 3.0%), rising 3.3% yr/yr (last 3.5%). October Unemployment Rate dipped to 5.1% from 5.2% (expected 5.2%). October House Prices were down 2.2% yr/yr (last -2.2%).
  • South Korea's October Import Price Index was up 0.5% yr/yr (last 0.6%) and Export Price Index was up 4.8% yr/yr (last 2.2%).
  • India's October WPI Inflation was down 1.21% yr/yr (expected -0.60%; last 0.13%).
  • Hong Kong's Q3 GDP expanded 0.7% qtr/qtr, as expected (last 0.7%), growing 3.8% yr/yr, as expected (last 3.8%).
  • New Zealand's October Business PMI hit 51.4 (last 50.1).
  • Eurozone's Q3 GDP expanded 0.2% qtr/qtr, as expected (last 0.1%), growing 1.4% yr/yr (expected 1.3%; last 1.5%). Q3 Employment increased by 0.1% qtr/qtr, as expected (last 0.1%), growing 0.5% yr/yr (last 0.6%). September trade surplus reached EUR19.4 bln (last surplus of EUR1.9 bln).
  • France's October CPI was up 0.1% m/m, as expected (last -1.0%), rising 0.9% yr/yr (expected 1.0%; last 1.2%).
  • Italy's September trade surplus reached EUR2.852 bln (expected surplus of EUR3.180 bln; last surplus of EUR1.875 bln).
  • Spain's October CPI was up 0.7% m/m, as expected (last -0.3%), rising 3.1% yr/yr, as expected (last 3.0%). October Core CPI was up 2.5% yr/yr, as expected (last 2.4%).
• Today's Data:
  • Weekly natural gas inventories increased by 45 bcf after increasing by 33 bcf a week ago.
• Commodities:
  • WTI crude: +2.3% to $60.08/bbl
  • Gold: -2.4% to $4095.20/ozt
  • Copper: -0.8% to $5.06/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1619
  • GBP/USD: -0.2% to 1.3164
  • USD/CNH: +0.1% to 7.1003
  • USD/JPY: UNCH at 154.54
• The Week Ahead:
  • Monday: November Empire State Manufacturing (Briefing.com consensus 6.1; prior 10.7) at 8:30 ET
  • Tuesday: October Import/Export Prices at 8:30 ET; October Industrial Production (Briefing.com consensus 0.1%; prior NA) and Capacity Utilization (Briefing.com consensus 77.5%; prior NA) at 9:15 ET; November NAHB Housing Market Index (Briefing.com consensus 36; prior 37) at 10:00 ET; and September net Long-Term TIC Flows (prior NA) at 16:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior 0.6%) at 7:00 ET; October Housing Starts (Briefing.com consensus 1.340 mln; prior NA) and Building Permits (Briefing.com consensus 1.355 mln; prior NA) at 8:30 ET; weekly crude oil inventories (prior 6.41 mln) at 10:30 ET; and $16 bln 20-yr Treasury bond auction results at 13:00 ET
  • Thursday: Weekly Initial Claims (prior NA), Continuing Claims (prior NA), and November Philadelphia Fed survey (Briefing.com consensus 2.0; prior -12.8) at 8:30 ET; October Existing Home Sales (Briefing.com consensus 4.08 mln; prior 4.06 mln) and October Leading Indicators (prior NA) at 10:00 ET; and weekly natural gas inventories (prior +45 bcf) at 10:30 ET
  • Friday: Flash November S&P Global U.S. Manufacturing PMI (prior 52.5) and flash November S&P Global U.S. Services PMI (prior 54.8) at 9:45 ET; and final November University of Michigan Consumer Sentiment (Briefing.com consensus 50.3; prior 50.3) at 10:00 ET

 Reversal Continues

• U.S. Treasuries trade on lows that were reached in recent action. Intraday trade has turned out to be a unidirectional affair with the market steadily sliding from its opening highs. The retreat has continued into the early afternoon with the 30-yr yield reaching its highest level in more than five weeks while yields on shorter tenors remain below their November highs. Elsewhere, equities have recovered from their weak start with the S&P 500 now up 0.5% for the day and up 0.6% for the week.
• Yield Check:
  • 2-yr: +2 bps to 3.61%
  • 3-yr: +2 bps to 3.61%
  • 5-yr: +3 bps to 3.73%
  • 10-yr: +3 bps to 4.15%
  • 30-yr: +5 bps to 4.75%

Opening Gains Reversed

• U.S. Treasuries have retreated from their opening levels, sending 10s and 30s into the red while shorter tenors remain in the green, though they too have faced steady pressure since the cash start. The early retreat makes for a continuation of this week's bumpy action, though even with the recent volatility, Treasuries are little changed for the week with yields on 2s and 10s up about three basis points for the week. Not long ago, Kansas City Fed President (FOMC voter) Schmid said that he is leaning against a December rate cut, shortly after Minneapolis Fed President (2026 voter) Kashkari said that he did not support the October cut and is not sure about December. Equities are of to a lower start, sending the S&P 500 (-0.5%) into negative territory for the week (-0.4%).
• Yield Check:
  • 2-yr: UNCH at 3.59%
  • 3-yr: -1 bp to 3.58%
  • 5-yr: UNCH at 3.70%
  • 10-yr: +1 bp to 4.12%
  • 30-yr: +2 bps to 4.73%

Belly Ahead

• U.S. Treasuries are on track for a higher start with the long bond set to show some early underperformance. Treasury futures saw limited movement during the overnight session, briefly falling to lows as the focus shifted from Asia to Europe. Overall, Treasury futures have held up better than other sovereign debt, considering most yields are up this morning. British gilts have underperformed amid reports that Chancellor Reeves no longer plans to seek higher income taxes in the Autumn budget statement thanks to improved economic projections from the Office of Budget Responsibility. Reported earlier in the night, China's growth figures for October showed some softness in fixed asset investment and industrial production. The U.S. government has reopened, but economic data reporting has yet to resume. National Economic Council Director Hassett said that a partial release of the October jobs report is being planned and that the full September jobs report could be released next week. Crude oil is on the rise while the U.S. Dollar Index is flat at 99.12.
• Yield Check:
  • 2-yr: -3 bps to 3.56%
  • 3-yr: -4 bps to 3.55%
  • 5-yr: -4 bps to 3.66%
  • 10-yr: -3 bps to 4.08%
  • 30-yr: -2 bps to 4.68%

• News:
  • The Trump administration is planning some tariff exemptions aimed at easing food inflation, according to The New York Times.
  • Officials from South Korea and the U.S. officially signed the trade and investment deal.
  • Germany's budget committee approved 2026 spending of EUR524.5 bln and nearly EUR100 bln in borrowing.
  • Press reports from the U.K. suggest that Chancellor Reeves will not seek higher taxes in the Autumn budget statement after all.
  • China's October Fixed Asset Investment was down 1.7% yr/yr (expected -0.9%; last -0.5%), October Industrial Production rose 4.9% yr/yr (expected 5.5%; last 6.5%), October Retail Sales increased 2.9% yr/yr (expected 2.7%; last 3.0%), rising 3.3% yr/yr (last 3.5%). October Unemployment Rate dipped to 5.1% from 5.2% (expected 5.2%). October House Prices were down 2.2% yr/yr (last -2.2%).
  • South Korea's October Import Price Index was up 0.5% yr/yr (last 0.6%) and Export Price Index was up 4.8% yr/yr (last 2.2%).
  • India's October WPI Inflation was down 1.21% yr/yr (expected -0.60%; last 0.13%).
  • Hong Kong's Q3 GDP expanded 0.7% qtr/qtr, as expected (last 0.7%), growing 3.8% yr/yr, as expected (last 3.8%).
  • New Zealand's October Business PMI hit 51.4 (last 50.1).
  • Eurozone's Q3 GDP expanded 0.2% qtr/qtr, as expected (last 0.1%), growing 1.4% yr/yr (expected 1.3%; last 1.5%). Q3 Employment increased by 0.1% qtr/qtr, as expected (last 0.1%), growing 0.5% yr/yr (last 0.6%). September trade surplus reached EUR19.4 bln (last surplus of EUR1.9 bln).
  • France's October CPI was up 0.1% m/m, as expected (last -1.0%), rising 0.9% yr/yr (expected 1.0%; last 1.2%).
  • Italy's September trade surplus reached EUR2.852 bln (expected surplus of EUR3.180 bln; last surplus of EUR1.875 bln).
  • Spain's October CPI was up 0.7% m/m, as expected (last -0.3%), rising 3.1% yr/yr, as expected (last 3.0%). October Core CPI was up 2.5% yr/yr, as expected (last 2.4%).
• Commodities:
  • WTI Crude: +1.5% to $59.54/bbl
  • Gold: -1.8% to $4117.70/ozt
  • Copper: -0.9% to $5.056/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1648
  • GBP/USD: -0.1% to 1.3177
  • USD/CNH: UNCH at 7.0935
  • USD/JPY: -0.3% to 154.07
• Data out Today:
  • 8:30 ET: October PPI (DELAYED; Briefing.com consensus 0.4%; prior NA), Core PPI (DELAYED; Briefing.com consensus 0.3%; prior NA), October Retail Sales (DELAYED; Briefing.com consensus 0.3%; prior NA), and Retail Sales ex-auto (DELAYED; Briefing.com consensus 0.3%; prior NA)
  • 10:00 ET: September Business Inventories (DELAYED; Briefing.com consensus 0.1%; prior NA)
  • 10:30 ET: Weekly natural gas inventories (prior +33 bcf)

Bumpy Week Continues

• U.S. Treasuries retreated on Thursday, lifting yields on 10s and 30s back above their 50-day moving averages, though intraday action was largely uneventful. Treasuries recorded the bulk of their losses at the open before establishing a sideways range that was in effect for the rest of the morning. Shorter tenors paced a late-morning rebound off lows that briefly lifted action above the day's starting levels, but the entire complex found renewed pressure after the U.S. Treasury completed this week's auction slate with an unimpressive 30-yr bond sale. The weak auction pressured the 30-yr bond to a fresh low, where it remained into the close while shorter tenors finished just above their morning lows. Today's selling dampened December rate cut expectations with the market now essentially projecting a toss-up. Crude oil climbed off a three-week low while the U.S. Dollar Index fell 0.4% to 99.12.
• Yield Check:
  • 2-yr: +2 bps to 3.59%
  • 3-yr: +3 bps to 3.59%
  • 5-yr: +4 bps to 3.70%
  • 10-yr: +5 bps to 4.11%
  • 30-yr: +4 bps to 4.70%

• News:
  • The International Energy Agency raised its supply and demand forecasts for 2025 and 2026.
  • Japan's Prime Minister Takaichi said that the primary balance target could be calculated over several years rather than annually, which would open the door to greater fiscal spending. She repeated that she would like to see higher tax revenues without tax hikes.
  • Germany's economy minister warned that trade dynamics are expected to weaken significantly in 2026.
  • China's October New Loans reached CNY220.0 bln (expected CNY460.0 bln; last CNY1.290 trln) and October Loans grew 6.5% yr/yr (expected 6.6%; last 6.6%). October total social financing reached CNY810.0 bln (expected CNY1.23 trln; last CNY3.53 trln). 
  • Japan's October PPI was up 0.4% m/m (last 0.5%), rising 2.7% yr/yr (expected 2.5%; last 2.8%).
  • Australia's October Employment increased by 42,200 (expected 20,000; last 12,800) and full Employment increased by 55,300 (last 6,500). October Unemployment Rate fell to 4.3% from 4.5% (expected 4.4%) and October Participation Rate remained at 67.0%. October MI Inflation Expectations slowed to 4.5% from 4.8%.
  • New Zealand's October Electronic Card Retail Sales grew 0.2% m/m (last -0.5%), rising 0.8% yr/yr (last 1.0%). September Visitor Arrivals increased 2.9% m/m (last 2.4%).
  • Eurozone's September Industrial Production was up 0.2% m/m (expected 0.7%; last -1.1%), rising 1.2% yr/yr (expected 2.1%; last 1.2%).
  • U.K.'s Q3 GDP expanded 0.1% qtr/qtr (expected 0.2%; last 0.3%), growing 1.3% yr/yr, as expected (last 1.4%).
  • France's Q3 Unemployment Rate rose to 7.7% from 7.6% (expected 7.6%).
  • Swiss October PPI was down -0.3% m/m (expected -0.1%; last -0.2%), falling 1.7% yr/yr (last -1.8%).
• Today's Data:
  • Weekly crude oil inventories increased by 6.41 mln barrels after increasing by 5.20 mln barrels a week ago.
  • $25 bln 30-year Treasury bond auction results (prior 12-auction average):
    • High yield: 4.694% (4.749%).
    • Bid-to-cover: 2.29 (2.40).
    • Indirect bid: 71.0% (62.8%).
    • Direct bid: 14.5% (24.2%).
• Commodities:
  • WTI crude: +0.4% to $58.74/bbl
  • Gold: -0.4% to $4195.00/ozt
  • Copper: -0.2% to $5.10/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1634
  • GBP/USD: +0.4% to 1.3187
  • USD/CNH: -0.2% to 7.0974
  • USD/JPY: -0.2% to 154.50
• The Day Ahead:
  • 8:30 ET: October PPI (Briefing.com consensus 0.4%; prior NA), Core PPI (Briefing.com consensus 0.3%; prior NA), October Retail Sales (Briefing.com consensus 0.3%; prior NA), and Retail Sales ex-auto (Briefing.com consensus 0.3%; prior NA)
  • 10:00 ET: September Business Inventories (Briefing.com consensus 0.1%; prior NA)
  • 10:30 ET: Weekly natural gas inventories (prior +33 bcf)