Bond Market Update

Long End Behind

• U.S. Treasuries are on track for a modestly lower start with longer tenors expected to show some early relative weakness. Treasury futures dipped in early evening trade but recovered their losses before the end of the Asian session. However, renewed pressure during European trade sent futures to fresh lows. Overnight volume was reduced once again due to holidays in China and India while Hong Kong's Hang Seng soared 6.2% with property names leading the way after Tuesday's closure. Geopolitical concerns remain elevated with reports indicating that Israel is planning to retaliate against Iran for yesterday's missile strike. This has helped crude oil rally to levels not seen since early September. The U.S. Dollar Index is up 0.1% at 101.29.
• Yield Check:
  • 2-yr: UNCH at 3.62%
  • 3-yr: UNCH at 3.52%
  • 5-yr: +1 bp to 3.53%
  • 10-yr: +2 bps to 3.76%
  • 30-yr: +3 bps to 4.11%

• News:
  • The Bank of Japan confirmed that bond purchases will be reduced this month.
  • Japan's Finance Minister Kato said that he has been instructed by the prime minister to pursue more wage hikes.
  • The Central Bank of Iceland unexpectedly lowered its policy rate by 25 bps to 9.00%, representing the first rate cut since the pandemic.
  • Germany's Machinery and Equipment Manufacturers Association said that August orders were up 7% thanks to 13% growth in foreign orders while orders from within the eurozone fell 7% yr/yr.
  • Moody's lowered Israel's rating to Baa1 from A2 with a Negative outlook due to intensifying geopolitical risk.
  • Japan's September Household Confidence rose to 36.9 from 36.7 (expected 37.1).
  • South Korea's September CPI was up 0.1% m/m (last 0.4%), rising 1.6% yr/yr (last 2.0%). September Manufacturing PMI hit 48.3 (last 51.9).
  • Australia's September AIG Construction Index improved to -19.8 from -38.1 and AIG Manufacturing Index fell to -33.6 from -30.8.
  • Eurozone's August Unemployment Rate remained at 6.4%, as expected.
  • France's August government budget deficit reached EUR171.9 bln (last deficit of EUR156.9 bln).
  • Italy's August Unemployment Rate fell to 6.2% from 6.4% (expected 6.5%).
  • Spain's September unemployment increased by 3,200 (expected 12,100; last 21,900).
• Commodities:
  • WTI Crude: +3.2% to $72.03/bbl
  • Gold: -0.7% to $2671.90/ozt
  • Copper: +0.7% to $4.623/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1077
  • GBP/USD: +0.1% to 1.3294
  • USD/CNH: UNCH at 7.0248
  • USD/JPY: +0.8% to 144.71
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -1.3%; prior 11.0%)
  • 8:15 ET: September ADP Employment Change (Briefing.com consensus 120,000; prior 99,000)
  • 10:30 ET: Weekly crude oil inventories (prior -4.47 mln)