Bond Market Update

Belly Paces Another Dip

• U.S. Treasuries faced a bit more selling on Tuesday, which drove yields on the 3-yr note and longer tenors to fresh highs for the month. The market did not receive any economic data today, which left the door open for a continuation of the recent selling. The market attempted a bounce during the initial 90 minutes of action before giving in to pressure that kept the 10-yr yield just above its 200-day moving average (4.176%). Issues in the belly underperformed in early action, and they remained behind into the close while the 2-yr note and the long bond put up more of a fight that kept them near yesterday's closing levels. With today's increase, the 10-yr yield is now up 60 basis points off its low from mid-September, which has been noticed by equities, though the S&P 500 spent the day in a steady recovery off its opening low. The Tuesday news flow was light, but there was ongoing uncertainty surrounding the conflict between Israel and Iran with press reports speculating that Israel could attack Iran in the coming days. Crude oil built on yesterday's bounce, rising toward its 50-day moving average (72.15) while the U.S. Dollar Index rose 0.1% to 104.06.
• Yield Check:
  • 2-yr: +1 bp to 4.04%
  • 3-yr: +3 bps to 3.98%
  • 5-yr: +3 bps to 4.01%
  • 10-yr: +2 bps to 4.20%
  • 30-yr: +1 bp to 4.49%

• News:
  • German Chancellor Scholz repeated his opposition to imposing new tariffs on electric vehicle imports from China.
  • An adviser with China's Academy of Social Sciences speculated that the country's government could issue CNY12 trln of debt to stimulate the economy in 2025. 
  • Chinese press reported that majority of companies listed in China saw positive profits in Q3.
  • Press reports from Australia noted a record number of insolvencies in Q3, as they grew 10% qtr/qtr, which was up 46% yr/yr.
  • Japan's August BoJ Core CPI was up 1.7% yr/yr (last 1.8%).
  • South Korea's September PPI was down 0.2% m/m (last -0.2%) but up 1.0% yr/yr (last 1.6%).
  • Hong Kong's September CPI was up 0.1% m/m (last 0.0%), rising 2.2% yr/yr (expected 2.4%; last 2.5%).
  • New Zealand's September trade deficit reached NZD2.11 bln (last deficit of NZD2.31 bln).
  • U.K.'s September Public Sector Net Borrowing reached GBP16.61 bln (expected GBP17.4 bln; last GBP13.02 bln).
• Commodities:
  • WTI crude: +2.3% to $71.67/bbl
  • Gold: +0.8% to $2759.10/ozt
  • Copper: +0.7% to $4.39/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0797
  • GBP/USD: -0.1% to 1.2976
  • USD/CNH: UNCH at 7.1346
  • USD/JPY: +0.3% to 151.06
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -17.0%)
  • 10:00 ET: September Existing Home Sales (Briefing.com consensus 3.90 mln; prior 3.86 mln)
  • 10:30 ET: Weekly crude oil inventories (prior -2.19 mln)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results