The US Treasury market showed muted overall performance on Tuesday following news of America's deep involvement in Venezuela, as traders focused their attention more intently on the week's packed macroeconomic calendar, particularly the December nonfarm payrolls report due Friday. Bond investors have been awaiting the latest labor market data from the Bureau of Labor Statistics. Previously, the October and November nonfarm payroll reports were delayed due to last year's government shutdown, which hampered market assessments. Strategists at BMO Capital Markets believe Friday's employment data could provide sufficient directional confidence for investors. According to the median forecast of economists, the US economy is expected to have added 73,000 jobs in December, up from 64,000 in November, while the unemployment rate is projected to edge down slightly from 4.6% to 4.5%.
Before that, the ADP private-sector employment report will be released on Wednesday, although this data is generally not considered a reliable leading indicator for the official nonfarm figures. Concurrently, the US Supreme Court may also rule on Friday regarding the legality of the Trump administration's global tariffs, a decision that could similarly impact the bond market. Vincent Ahn, a portfolio manager at Wisdom Fixed Income Management, stated that current interest rate and credit markets are primarily trading around US economic growth, inflation, and the Federal Reserve's next policy moves. "Precisely because of this, Friday's jobs report holds greater significance for the Treasury market than the Venezuela event," he noted, adding that only if the Venezuela situation triggers sustained oil price volatility, which then feeds into gasoline prices and inflation expectations, would it genuinely affect the bond market—a scenario not currently observed.
Ahn further emphasized in an email to media, "Venezuela has not altered the inflation narrative and therefore has not driven the bond market." From a trading perspective, related headlines primarily affect crude oil flows and logistical complexities; the global oil supply and demand balance remains relatively loose, and any substantive change in Venezuelan supply would take time to materialize. In the absence of sustained oil price increases capable of altering the inflation trajectory, US Treasuries and overall credit spreads still have more critical factors to digest. On Tuesday, tensions remained high within Venezuela. Following the arrest of Venezuelan leader Maduro over the weekend, security forces were deployed in the streets. Meanwhile, European leaders publicly expressed support for Greenland after Trump again threatened to take over the Danish-controlled territory.
In market movements, crude oil prices fluctuated during the day, with Brent crude, the international benchmark, hovering around $61 per barrel. The bond market experienced minor selling pressure, with yields on everything from 1-year T-bills to 30-year bonds edging slightly higher; the 10-year US Treasury yield rose modestly on the day. This contrasted with Monday's session, which saw a slight rebound in Treasury prices and a corresponding dip in yields. Bond prices move inversely to yields. Will Compernolle, a strategist at FHN Financial in Chicago, viewed Tuesday's pullback in US Treasuries more as "random noise," reflecting a wait-and-see attitude ahead of key event risks and the gradual normalization of trading volumes post the New Year. Regarding the Venezuela situation, the market does not perceive a major disruption risk akin to that in the Middle East, nor the possibility of a sharp oil price spike or global supply disruptions, thus failing to trigger a safe-haven flow into government bonds.
Compernolle pointed out that if US intervention were to impact markets, it would likely manifest through two main channels: first, via oil price changes affecting inflation expectations, and second, through the federal fiscal deficit—specifically, whether the US presence in Venezuela evolves into a long-term, high-cost operation similar to those in Iraq or Afghanistan. Currently, these potential impacts remain highly uncertain. Although some strategists have drawn comparisons to historical events like the 1989 US invasion of Panama or the 1990 intervention in Chile, Compernolle believes it is still too early to draw conclusions. He stated that Venezuela's existing governmental structure persists, and it remains difficult to judge "whether fundamental change will actually occur, or if the US will adopt a more aggressive approach to intervention."
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