Bond Market Update

Long End Leads

• U.S. Treasuries are on track for a higher start with longer tenors set to pace the early advance after showing some relative strength yesterday. The night started in quiet fashion with markets in China, South Korea, and Hong Kong closed for holidays. The market still received a sizable batch of data from Asia, including another contractionary Manufacturing PMI from Japan (49.7) and mostly contractionary Manufacturing PMI readings from Europe with the eurozone's (45.0) reading remaining below 50.0. Treasury futures slid to lows once the focus shifted to Europe, where equity markets are mixed while sovereign debt in on the rise after the eurozone's CPI for September (1.8% yr/yr; prior 2.2%) slipped below the European Central Bank's 2.0% target. The U.S. session will also see the release of some manufacturing data and it is worth noting that dockworkers at East Coast and Gulf Coast ports went on strike today after rejecting the latest contract offer from the United States Maritime Alliance. Crude oil is facing some pressure while the U.S. Dollar Index is up 0.3% at 101.11.
• Yield Check:
  • 2-yr: -2 bps to 3.63%
  • 3-yr: -4 bps to 3.53%
  • 5-yr: -5 bps to 3.53%
  • 10-yr: -6 bps to 3.74%
  • 30-yr: -6 bps to 4.07%

• News:
  • French Prime Minister Barnier is expected to call for tax hikes that will raise up to EUR18 bln of revenue.
  • Japan's September Manufacturing PMI hit 49.7 (expected 49.6; last 49.8). August jobs/applications ratio dipped to 1.23 from 1.24 (expected 1.24) and August Unemployment Rate fell to 2.5% from 2.7% (expected 2.6%). Q3 Tankan All Big Industry Capex was up 10.6% (expected 11.9%; last 11.1%).
  • South Korea's September trade surplus reached $6.66 bln (last surplus of $3.77 bln) as imports rose 2.2% yr/yr (last 6.0%) and exports grew 7.5% yr/yr (last 11.2%).
  • India's September Manufacturing PMI hit 56.5 (expected 56.7; last 57.5).
  • Singapore's Q3 URA Property Index was down 1.1% qtr/qtr (last 0.9%).
  • Australia's August Building Approvals fell 6.1% m/m (expected -4.3%; last 11.0%) but were up 7.9% yr/yr (last 25.2%). Private House Approvals were up 0.5% (last 0.9%). August Retail Sales rose 0.7% m/m (expected 0.4%; last 0.1%). September Commodity Prices were down 10.1% yr/yr (last -6.0%).
  • New Zealand's August Building Consents were down 5.3% m/m (last 26.4%) and Q3 Business Confidence was down 1% (last -44%).
  • Eurozone's September Manufacturing PMI hit 45.0 (expected 44.8; last 45.8). September CPI was down 0.1% m/m (last 0.1%) but up 1.8% yr/yr, as expected (last 2.2%). September Core CPI was up 0.1% m/m (last 0.3%), rising 2.7% yr/yr, as expected (last 2.8%).
  • Germany's September Manufacturing PMI hit 40.6 (expected 40.3; last 42.4).
  • U.K.'s September Manufacturing PMI hit 51.5, as expected (last 52.5).
  • France's September Manufacturing PMI hit 44.6 (expected 44.0; last 43.9).
  • Italy's September Manufacturing PMI hit 48.3 (expected 49.0; last 49.4).
  • Spain's September Manufacturing PMI hit 53.0 (expected 50.2; last 50.5).
  • Swiss August Retail Sales were up 3.2% yr/yr (expected 2.6%; last 2.9%) and September procer.ch PMI hit 49.9 (expected 47.9; last 49.0).
• Commodities:
  • WTI Crude: -0.8% to $67.62/bbl
  • Gold: +0.5% to $2671.70/ozt
  • Copper: +0.2% to $4.562/lb
• Currencies:
  • EUR/USD: -0.4% to 1.1086
  • GBP/USD: -0.3% to 1.3322
  • USD/CNH: +0.3% to 7.0259
  • USD/JPY: +0.2% to 143.76
• Data out Today:
  • 9:45 ET: Final September S&P Global U.S. Manufacturing PMI (prior 47.9)
  • 10:00 ET: September ISM Manufacturing Index (Briefing.com consensus 47.7%; prior 47.2%), August job openings (prior 7.673 mln), and August Construction Spending (Briefing.com consensus 0.1%; prior -0.3%)