Bond Market Update

Mixed Start Ahead

• U.S. Treasuries are on track for a slightly higher start in the 2-yr note while longer tenors are expected to begin just below their unchanged levels. Treasury futures spent the early portion of the night in a sideways range, followed by a short-lived retreat near the end of the Asian session, which has been reversed in early morning trade. China reported above-consensus growth figures for September, though overall Q3 GDP growth (0.9%; expected 1.0%) was a touch shy of estimates. Hopes for additional stimulus remain in place after People's Bank of China Governor Pan said that the reserve requirement ratio could be reduced again this year and that the loan prime rate will likely be lowered on Monday. Elsewhere, expectations for another rate cut from the Bank of England have been pressured after September Retail Sales beat expectations (0.3%; expected -0.3%) while the market continues expecting another rate cut from the European Central Bank in December. Economic data during the U.S. session will be limited to the 8:30 ET release of Housing Starts (Briefing.com consensus 1.350 mln; prior 1.356 mln) and Building Permits (Briefing.com consensus 1.455 mln; prior 1.475 mln) for September. Crude oil holds a modest loss while the U.S. Dollar Index is down 0.2% at 103.64, trimming this week's gain to 0.7%.
• Yield Check:
  • 2-yr: -1 bp to 3.98%
  • 3-yr: -1 bp to 3.89%
  • 5-yr: UNCH at 3.91%
  • 10-yr: +1 bp to 4.11%
  • 30-yr: +1 bp to 4.41%

• News:
  • Japan's new top currency diplomat said that moves in the yen are being closely watched after the currency weakened to 150/dollar, making for a continuation of a pullback from the September high in the 139 area.
  • U.S. authorities are reportedly investigating Taiwan Semiconductor Manufacturing (TSM) over alleged sales of chips to Huawei despite a ban that is in place.
  • European Central Bank policymaker Villeroy de Galhau said that the 2.0% inflation target should be reached earlier than expected.
  • China's Q3 GDP expanded 0.9% qtr/qtr (expected 1.0%; last 0.7%), growing 4.6% yr/yr, as expected (last 4.7%). September Fixed Asset Investment was up 3.4% yr/yr (expected 3.3%; last 3.4%), September Industrial Production was up 5.4% yr/yr (expected 4.6%; last 4.5%), September Retail Sales rose 3.2% yr/yr (expected 2.5%; last 2.1%), September Unemployment Rate fell to 5.1% from 5.3% (expected 5.3%), and September House Prices were down 5.8% yr/yr (last -5.3%).
  • Japan's September National CPI was down 0.3% m/m (last 0.5%) but up 2.5% yr/yr (last 3.0%). September National Core CPI was up 2.4% yr/yr (expected 2.3%; last 2.8%).
  • Hong Kong's September Unemployment Rate remained at 3.0%.
  • Eurozone's August Current Account surplus reached EUR31.5 bln (expected surplus of EUR42.2 bln; last surplus of EUR39.6 bln). August Construction Orders ticked up 0.1% m/m (last -0.5%).
  • U.K.'s September Retail Sales were up 0.3% m/m (expected -0.3%; last 1.0%), rising 3.9% yr/yr (expected 3.2%; last 2.3%). September Core Retail Sales were up 0.3% m/m (expected -0.3%; last 1.1%), rising 4.0% yr/yr (expected 3.2%; last 2.2%).
  • Spain's August trade deficit reached EUR4.8 bln (last deficit of EUR3.2 bln).
• Commodities:
  • WTI Crude: -0.4% to $70.41/bbl
  • Gold: +0.7% to $2726.00/ozt
  • Copper: +1.5% to $4.39/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0850
  • GBP/USD: +0.3% to 1.3043 
  • USD/CNH: -0.2% to 7.1193
  • USD/JPY: -0.1% to 149.98
• Data out Today:
  • 8:30 ET: September Housing Starts (Briefing.com consensus 1.350 mln; prior 1.356 mln) and Building Permits (Briefing.com consensus 1.455 mln; prior 1.475 mln)