EUROPEAN FISCAL: r-g An Increasing Concern For France's Debt Trajectory

• MNI: BRAZIL DEC FLASH IPCA-15 +0.25% M/M

Treasuries have firmed throughout Asia and London trading, with assistance from JGBs paring previous losses and a dovish repricing in EUR STIR following Schnabel yesterday (despite her broadly clarifying pre-ECB meeting remarks). Year-end factors could also be at play. Today’s focus will be on a solid data docket before further issuance, the latter highlighted by the 5Y but with some added attention on bills after yesterday’s preference for longer-dated maturities. 

• Cash yields are 0.5-2.5bp lower, bull steepening with curves pulling back a little further off recent highs.
• TYH6 trades at session highs of 112-16 (+05) on tiny cumulative volumes of 125k.
• It reverses yesterday’s further losses which saw a low of 112-09+ (not troubling support at 112-06, Dec 16 low) but is only back at the low end of Friday’s range and is still a way off resistance at 112-21+ (50-day EMA).
• Data: Weekly ADP (0815ET), GDP Q3 (0830ET), Durable goods Oct prelim (0830ET), Philly Fed non-mfg (0830ET), Weekly Redbook retail sales (0855ET), IP/cap util Nov & Oct (0915ET), Conf Board consumer survey Dec (1000ET), Richmond Fed mfg Dec (1000ET)
• Coupon issuance: $70B 5Y Note - 91282CPR6, US Tsy $28B 2Y FRN - 91282CPG0 (1300ET). Yesterday’s 2Y tailed by 0.2bp and bid-to-cover slipped from 2.68 to 2.58, whilst last month’s 5Y also tailed by 0.2bp but with the bid-to-cover nudging higher from 2.38 to 2.41.
• Bill issuance: US Tsy $75B 6W & $50B 52W bill auctions (1130ET). Yesterday’s six-month offering was preferred to the three-month with Fed rate expectations potentially at play.
• Politics: Trump doesn’t have any public events scheduled

• On the commodity front, the trend structure in Gold is unchanged, it remains bullish and another fresh cycle high reinforces current conditions. The break higher confirms a resumption of the primary uptrend. The metal has traded through the psychological $4400.0 handle and this opens $4500.0 next, ahead of $4536.0, the 1.500 projection of the Oct 28 - Nov 13 - Nov 18 swing. Initial firm support to watch lies at $4259.9, the 20-day EMA. A pullback would be considered corrective.
• The trend condition in WTI futures remains bearish and short-term gains are considered corrective. MA studies are in a bear-mode position, highlighting a dominant downtrend. A key support and the bear trigger at $56.11, the Oct 17 low, has been breached. Clearance of this level resumes the downtrend and opens $53.77, a 1.764 projection of the Jul 30 - Aug 13 - Sep 26 price swing. Key short-term resistance to watch is $61.25, the Oct 24 high. First resistance is at $58.71, the 50- day EMA.