Andrew Wilkinson submits:

A positive end to the calendar year in the form of lower claims for unemployment insurance has left the U.S. government bond market nursing losses as evidence mounts that it won’t just be champagne flowing into the New Year. The improving economic tone looks certain to improve in the first quarter of 2010 sending expectations higher for a change in the policy settings from the Fed. At this stage of the game there is little point in trying to assuage investors that the Fed won’t shift policy anytime soon – which it won’t. The bleeding wounds of capital losses on bonds are evidenced by a one month surge in yields in the last five weeks from 3.15% to 3.89%. Yields are ending the year within a single bad session of reaching the 4% peak witnessed mid-year when investors first panicked about a change of heart from the Fed.

With European markets already closed for New Year celebration there is a lack of newsworthy material and price action to report other than in the dollar complex.

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