Bond Market Update

Opening Range Maintained

• U.S. Treasuries continue trading in positive territory after another rangebound start to the trading day. Treasuries opened the session with slight gains, followed by a sideways drift in most tenors. The long bond has shown some relative strength, reaching a fresh high in recent trade, while other tenors continue trading within a basis point of their starting levels. Equities are off to a lower start with the S&P 500 (-0.6%) trading ahead of the Nasdaq (-0.9%).
• Yield Check:
  • 2-yr: -2 bps to 3.58%
  • 3-yr: -2 bps to 3.59%
  • 5-yr: -2 bps to 3.70%
  • 10-yr: -2 bps to 4.09%
  • 30-yr: -2 bps to 4.67%

Front End Ahead

• U.S. Treasuries are on track for a modestly higher start across the curve after some overnight weakness in global equity markets. Treasury futures spent the early part of the night in a sideways range but they rallied to highs at the start of the European session alongside weakness in most equity markets. Other sovereign debt has also advanced, but the overall gains have been limited. U.K.'s gilts have shown some relative strength amid speculation that British Chancellor Reeves will announce a tax hike as part of her Autumn budget statement in late November. Economic data released overnight included a hotter-than-expected October CPI from South Korea (2.4% yr/yr; expected 2.1%), but the Bank of Korea expects a quick return to the 2.0% target. Crude oil is on the defensive while the U.S. Dollar Index is up 0.3% at 100.14.
• Yield Check:
  • 2-yr: -2 bps to 3.58%
  • 3-yr: -2 bps to 3.59%
  • 5-yr: -2 bps to 3.70%
  • 10-yr: -2 bps to 4.09%
  • 30-yr: -1 bp to 4.68%

• News:
  • The Reserve Bank of Australia left its cash rate at 3.60%, as expected, and Governor Bullock left the door open to a potential future change in either direction.
  • British Chancellor Reeves appears to be considering a tax hike to plug a GBP22 bln budget gap while Prime Minister Starmer told members of his party that the Autumn budget will include "tough but fair" decisions.
  • European Central Bank policymaker Rehn said that economic uncertainty remains elevated.
  • European Central Bank policymaker Patsalides said that competitiveness in the EU needs to be improved.
  • Japan's October Manufacturing PMI hit 48.2 (expected 48.3; last 48.3).
  • South Korea's October CPI was up 0.3% m/m (expected 0.0%; last 0.5%), rising 2.4% yr/yr (expected 2.1%; last 2.1%).
  • France's September government budget deficit reached EUR155.4 bln (last deficit of EUR157.5 bln).
  • Spain's October Unemployment increased by 22,100 (expected 5,200; last -4,800).
• Commodities:
  • WTI Crude: -1.4% to $60.17/bbl
  • Gold: -0.4% to $3997.80/ozt
  • Copper: -2.9% to $4.922/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1486
  • GBP/USD: -0.6% to 1.3060
  • USD/CNH: +0.1% to 7.1291
  • USD/JPY: -0.4% to 153.53
• Data out Today:
  • 8:30 ET: September Trade Balance (DELAYED; prior NA)
  • 10:00 ET: September Factory Orders (DELAYED; prior NA) and September Job Openings (DELAYED; prior 7.227 mln)

Quiet Start to November

• U.S. Treasuries started November on a flat note, spending the day in a sideways range near their opening levels. The trading day started with modest gains that were paced by shorter tenors after a night that saw gains in most global equity markets and some weakness in sovereign debt. Final October Manufacturing PMI readings from major economies showed a return to contraction in South Korea's reading (49.4) while China's RatingDog Manufacturing PMI (50.6) reflected a deceleration in the pace of growth. Eurozone's Manufacturing PMI hit 50.0, reflecting no month-over-month change in activity. Treasuries climbed to highs in morning trade, but they quickly found resistance, pulling back from highs even though the ISM Manufacturing Index for October (48.7%; Briefing.com consensus 49.4%) showed a deepening contraction in activity. The U.S. Treasury announced this afternoon that borrowing in Q4 is expected to reach $569 bln, $21 bln below the prior estimate, while borrowing in Q1 is expected to reach $578 bln. Crude oil inched higher while the U.S. Dollar Index rose 0.1% to 99.87.
• Yield Check:
  • 2-yr: -1 bp to 3.60%
  • 3-yr: UNCH at 3.61%
  • 5-yr: UNCH at 3.72%
  • 10-yr: +1 bp to 4.11%
  • 30-yr: +2 bps to 4.69%

• News:
  • The Reserve Bank of Australia will release its latest policy Statement tomorrow, but a rate change is not expected.
  • The European Central Bank's survey of monetary analysts showed expectations for no change in rates until early 2028, followed by rate hikes.
  • The French government is still struggling to reach a budget agreement.
  • OPEC+ agreed to increase its output by 137,000 barrels per day in December, followed by a pause in Q1.
  • China's October RatingDog Manufacturing PMI hit 50.6 (expected 50.7; last 51.2).
  • South Korea's October trade surplus reached $6.06 bln (expected surplus of $2.98 bln; last surplus of $9.53 bln) as imports fell 1.5% yr/yr (expected -1.4%; last 8.2%) and exports rose 3.6% yr/yr (last 12.6%). October Manufacturing PMI hit 49.4 (last 50.7).
  • India's October Manufacturing PMI hit 59.2 (last 58.4).
  • Australia's October Manufacturing PMI hit 49.7 (last 49.7) and October MI Inflation Gauge was up 0.3% m/m (last 0.4%). September Building Approvals rose 12.0% m/m (expected 5.1%; last -3.6%), rising 12.4% yr/yr (last -0.7%). Private House Approvals were up 4.0% m/m (last -1.0%). October Commodity Prices fell 1.3% yr/yr (last 0.1%).
  • New Zealand's September Building Consents rose 7.2% m/m (last 6.1%).
  • Eurozone's October Manufacturing PMI hit 50.0, as expected (last 50.0).
  • Germany's October Manufacturing PMI hit 49.6, as expected (last 49.6).
  • U.K.'s October Manufacturing PMI hit 49.7 (expected 49.6; last 49.7).
  • France's October Manufacturing PMI hit 48.8 (expected 48.3; last 48.8).
  • Italy's October Manufacturing PMI hit 49.9 (expected 49.3; last 49.0).
  • Spain's October Manufacturing PMI hit 52.1 (expected 51.8; last 51.5).
  • Swiss October CPI was down 0.3% m/m (expected -0.1%; last -0.2%) but up 0.1% yr/yr (expected 0.3%; last 0.2%). October Manufacturing PMI hit 48.2 (expected 49.3; last 49.0).
• Today's Data:
  • The October ISM Manufacturing Index checked in at 48.7% for October (Briefing.com consensus: 49.4%), down from 49.1% in September. The dividing line between expansion and contraction is 50.0%, so the October figure, which is the eighth straight month below 50.0%, suggests manufacturing activity contracted at a faster pace than the prior month.
    • The key takeaway from the report is that the manufacturing sector saw its eighth consecutive month of contraction, with uncertainty about tariffs and the global economy tempering demand.
  • The S&P Global U.S. Manufacturing PMI hit 52.5 in the final reading for October, up from 52.2 in the preliminary reading and 52.0 in September.
• Commodities:
  • WTI crude: +0.1% to $61.00/bbl
  • Gold: +0.4% to $4013.60/ozt
  • Copper: -0.6% to $5.06/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1522
  • GBP/USD: -0.1% to 1.3139
  • USD/CNH: +0.1% to 7.1261
  • USD/JPY: +0.2% to 154.19
• The Day Ahead:
  • 8:30 ET: September Trade Balance (DELAYED; prior NA)
  • 10:00 ET: September Factory Orders (DELAYED; prior NA) and September Job Openings (DELAYED; prior 7.227 mln)

Opening Levels Revisited

• U.S. Treasuries have continued navigating a sideways range, which leaves most tenors very close to their opening levels. The market saw some morning buying that lifted action to fresh highs, but that move was reversed as the morning went on, returning action toward the day's starting levels. The 10-yr yield is now just above its 50-day moving average (4.098%) after finishing last Friday just below that mark. Up front, the 2-yr yield approached its 50-day moving average (3.561%) during the morning bounce, but it is now back above that level after the return toward session lows.
• Yield Check:
  • 2-yr: -1 bp to 3.60%
  • 3-yr: UNCH at 3.61%
  • 5-yr: UNCH at 3.72%
  • 10-yr: +1 bp to 4.11%
  • 30-yr: +2 bps to 4.69%

Short End Maintains Lead

• U.S. Treasuries trade in mixed fashion with the 5-yr note and shorter tenors hanging onto their early gains while 10s and 30s hover just below their flat lines. The early part of the Monday session has been quiet with Treasuries drifting in a sideways range. Treasuries climbed above their starting levels alongside a mixed open in equities, which has the S&P 500 (+0.1%) holding a modest gain while the Dow (-0.4%) underperforms. Economic data released this morning included a flash November Manufacturing PMI (52.5) that pointed to an ongoing expansion while the ISM Manufacturing Index (48.7%; Briefing.com consensus 49.4%) headed in the opposite direction, showing a deepening contraction.
• Yield Check:
  • 2-yr: -2 bps to 3.59%
  • 3-yr: -1 bp to 3.60%
  • 5-yr: -1 bp to 3.71%
  • 10-yr: UNCH at 4.10%
  • 30-yr: +1 bp to 4.68%