Bond Market Update

Updated: 11-Sep-23 15:13 ET

Treasury Market Summary

Long Bond Paces Quiet Slide

U.S. Treasuries began the week with losses across the curve, though intraday action was confined to a sideways range near the day's starting levels. Treasuries stumbled out of the gate after a quiet night that featured no market moving data. However, Bank of Japan Governor Ueda revealed that Japan's policy rate could be lifted out of negative territory this year, but it was unclear if he was referencing the end of the calendar year or the end of the fiscal year on March 31. Treasuries followed their lower start with a bounce that briefly returned the 5-yr note to unchanged, but the entire complex reversed from highs over the next few minutes, nestling into a narrow range that remained in effect into the close. The market held its ground through the completion of today's $44 bln 3-yr note sale, which met decent demand. Today's underperformance in longer tenors lifted yields on 10s and 30s back to last week's highs while the 2-yr yield remains five basis points below its high from last Tuesday. Crude oil gave back a small portion of its gain from Friday while the U.S. Dollar Index lost 0.5% to 104.56 as the greenback fell from a ten-month high against the yen.
Yield Check:
- 2-yr: +2 bps to 4.99%
- 3-yr: +1 bp to 4.70%
- 5-yr: +2 bps to 4.41%
- 10-yr: +3 bps to 4.29%
- 30-yr: +5 bps to 4.38%

News:
- The New York Fed's latest Survey of Consumer Expectations showed that year-ahead inflation expectations ticked up by fewer than ten basis points to 3.6% while the three-year outlook dipped by ten basis points to 2.8%.
- Standard & Poor's affirmed Portugal's BBB+ rating and raised the outlook to Positive from Stable.
- The European Commission's summer economic forecast lowered the 2023 growth outlook for the eurozone to 0.8% from 1.1% with Germany's forecast being lowered to -0.4% from +0.2%.
- China Securities Journal speculated that the People's Bank of China will continue lowering the reserve requirement ratio.
- South Korea's exports were down 7.9% yr/yr during the first ten days of September with chip exports falling 28.2%.
- Chevron's LNG workers in Australia remain on strike.
- China's August CPI was up 0.3% m/m, as expected (last 0.2%), rising 0.1% yr/yr, as expected (last -0.3%). August PPI was down 3.0% yr/yr, as expected (last -4.4%). August New Loans reached CNY1.36 trln (expected CNY1.20 trln; last CNY345.9 bln) and August total social financing reached CNY3.12 trln (expected CNY2.46 trln; last CNY528.2 bln).
- Japan's August Machine Tool Orders were down 17.6% yr/yr (last -19.7%).
- Italy's July Industrial Production was down 0.7% m/m (expected -0.3%; last 0.5%), falling 2.1% yr/yr (expected -1.7%; last -0.7%).
Today's Data:
- $44 bln 3-year Treasury note auction results (prior 12-auction average):
  - High yield: 4.660% (4.159%).
  - Bid-to-cover: 2.75 (2.67).
  - Indirect bid: 57.7% (63.5%).
  - Direct bid: 22.1% (18.8%).
- Commodities:
  - WTI crude: -0.2% to $87.29/bbl
  - Gold: +0.1% to $1946.10/ozt
  - Copper: +2.2% to $3.80/lb
- Currencies:
  - EUR/USD: +0.4% to 1.0745
  - GBP/USD: +0.3% to 1.2508
  - USD/CNH: -0.8% to 7.3044
  - USD/JPY: -0.8% to 146.59
- No Data on Tomorrow's Schedule
- Treasury Auctions:
  - 13:00 ET: $35 bln 10-yr Treasury note reopening results