Bond Market Update

Long End Slightly Behind

• U.S. Treasuries are on track for a mixed start with longer tenors expected to show early relative weakness ahead of the 8:30 ET release of the PPI report for September (Briefing.com consensus 0.1%). Treasury futures spent the bulk of the night in a narrow sideways range, sliding to lows in early morning action once the focus turned to Europe. Before that, equity markets in Asia finished the week on a mostly lower note amid a limited flow of data. That said, the Bank of Korea lowered its policy rate by 25 basis points to 3.25%, which was expected. China's fiscal stimulus remained in focus with China's Ministry of Finance set to brief the press tomorrow on planned fiscal policy adjustments. In the U.S., banks are kicking off the Q3 reporting season with strong results from JPMorgan Chase (JPM) and Wells Fargo (WFC). Crude oil is giving back some of yesterday's advance while the U.S. Dollar Index is little changed at 102.94.
• Yield Check:
  • 2-yr: -2 bps to 3.98%
  • 3-yr: -1 bp to 3.90%
  • 5-yr: +1 bp to 3.92%
  • 10-yr: UNCH at 4.10%
  • 30-yr: +1 bp to 4.40%

• News:
  • The French government announced a draft budget for 2025, aiming for a 5% budget deficit, but the plan also calls for a six-month freeze on state pensions, which is being opposed by all legislative blocks.
  • Germany is reportedly planning a 10% increase to its debt issuance in 2025.
  • BP raised its production outlook for Q3. 
  • Japan's September M2 Money Stock was up 1.3% yr/yr (expected 1.5%; last 1.3%).
  • New Zealand's September Business PMI hit 46.9 (last 45.8). September Visitor Arrivals were down 4.3% m/m (last 2.2%), and September FPI was up 0.5% m/m (last 0.2%).
  • Germany's September CPI was unchanged m/m, as expected (last -0.1%), rising 1.6% yr/yr, as expected (last 1.9%).
  • U.K.'s August GDP expanded 0.2% m/m, as expected (last 0.0%), growing 1.0% yr/yr (expected 1.4%; last 0.9%). August Construction Output was up 0.4% m/m (expected 0.5%; last -0.4%), rising 0.3% yr/yr (expected -0.3%; last -1.4%). August Industrial Production was up 0.5% m/m (expected 0.2%; last -0.7%) but down 1.6% yr/yr (expected -0.5%; last -2.2%). August Manufacturing Production was up 1.1% m/m (expected 0.3%; last -1.2%) but down 0.3% yr/yr (expected -0.4%; last -2.0%). August trade deficit reached GBP15.06 bln (expected deficit of GBP18.80 bln; last deficit of GBP18.87 bln).
  • Swiss October SECO Consumer Climate improved to -34 from -35 (expected -33).
• Commodities:
  • WTI Crude: -0.8% to $75.22/bbl
  • Gold: +0.8% to $2660.50/ozt
  • Copper: +0.6% to $4.454/lb
• Currencies:
  • EUR/USD: UNCH at 1.0933
  • GBP/USD: +0.1% to 1.3064
  • USD/CNH: -0.1% to 7.0728
  • USD/JPY: +0.3% to 148.98
• Data out Today:
  • 8:30 ET: September PPI (Briefing.com consensus 0.1%; prior 0.2%) and Core PPI (Briefing.com consensus 0.2%; prior 0.3%)
  • 10:00 ET: Preliminary October University of Michigan Consumer Sentiment (Briefing.com consensus 70.1; prior 70.1)