US Dollar (USD) bounced off mid-November lows yesterday but has yet to reclaim its 200-day moving average. 10-year Treasury yields steadied around 4.09% after rising nearly 10bps yesterday as heavy corporate borrowing drew demand away from government bonds. Merck & Co. led the wave issuing the largest share totaling $15.8 billion across the 20-30-and 40-year trances, BBH FX analysts report.

Treasury yields steady amid heavy corporate borrowing

"We expect USD to consolidate in the near term. However, narrowing US-G6 rate differentials suggests the path of least resistance for USD is down."

"The contraction in US manufacturing activity unexpectedly deepened in November and argues for a December Fed funds rate cut, which is now virtually fully priced-in. The headline index slipped to a four-month low at 48.2 (consensus: 49.0) vs. 48.7 in October and details were poor."

"New orders-to-inventories ratio dropped below 1, suggesting firms may need to scale back production as supply exceeds demand. The employment index fell to a three-month low at 44.0 vs. 46.0 in October, indicating increasing job losses. Prices Paid index edged up 0.5pts to 58.5 but remains well below its June peak of 69.4, hinting at limited upside risk to inflation."