Bond Market Update

Bouncing Off October Lows

• U.S. Treasuries are on track for a higher start that will pressure yields from their highest levels of the month. Treasury futures spent the night in a steady ascent that began in early evening action and continued through the night. Longer tenors were at the forefront of the overnight strength after yesterday's outperformance in the long bond, but the belly took the lead this morning. The night brought the release of flash Manufacturing and Services PMI readings from major economies with Japan seeing its fourth consecutive month of contracting activity in Manufacturing (49.0) while Australia's manufacturing sector contracted for the ninth month in a row (46.6). Elsewhere, eurozone's Manufacturing PMI (45.9) contracted at a slower-than-expected pace while Services PMI growth (51.2) was shy of estimates. As a result, expectations for a 50-bps December cut from the European Central Bank are increasing. The U.S. session will also feature the release of the latest PMI readings, which will be preceded by the latest jobless claims report at 8:30 ET (Briefing.com consensus 246,000; prior 241,000) and September New Home Sales (Briefing.com consensus 713,000; prior 716,000) at 10:00 ET. Crude oil is rising toward its 50-day moving average (71.89) while the U.S. Dollar Index is down 0.2% at 104.19.
• Yield Check:
  • 2-yr: -4 bps to 4.05%
  • 3-yr: -5 bps to 3.99%
  • 5-yr: -6 bps to 4.00%
  • 10-yr: -5 bps to 4.19%
  • 30-yr: -5 bps to 4.47%

• News:
  • South Korea's Q3 GDP growth missed expectations due to slowing technology exports.
  • European Central Bank policymaker Centeno said that the central bank is behind the curve when it comes to its easing efforts.
  • Barclays (BCS) increased its net interest income guidance for its British unit.
  • Japan's flash October Manufacturing PMI hit 49.0 (expected 49.9; last 49.7) and flash Services PMI hit 49.3 (last 53.1).
  • South Korea's Q3 GDP was up 0.1% qtr/qtr (expected 0.5%; last -0.2%), rising 1.5% yr/yr (expected 2.0%; last 2.3%).
  • India's flash October Manufacturing PMI hit 57.4 (last 56.5) and flash Services PMI hit 57.9 (last 57.7).
  • Australia's flash October Manufacturing PMI hit 46.6 (last 46.7) and flash Services PMI hit 50.6 (last 50.5).
  • Eurozone's flash October Manufacturing PMI hit 45.9 (expected 45.1; last 45.0) and flash Services PMI hit 51.2 (expected 51.5; last 51.4).
  • Germany's flash October Manufacturing PMI hit 42.6 (expected 40.7; last 40.6) and flash Services PMI hit 51.4 (expected 50.6; last 50.6).
  • U.K.'s flash October Manufacturing PMI hit 50.3 (expected 51.5; last 51.5) and flash Services PMI hit 51.8 (expected 52.3; last 52.4). October CBI Industrial Trends Orders rose to -27 from -35 (expected -28).
  • France's flash October Manufacturing PMI hit 44.5 (expected 44.9; last 44.6) and flash Services PMI hit 48.3 (expected 49.8; last 49.6). October Business Survey fell to 92 from 99 (expected 98).
• Commodities:
  • WTI Crude: +0.5% to $71.10/bbl
  • Gold: +0.8% to $2751.30/ozt
  • Copper: +0.6% to $4.363/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0798
  • GBP/USD: +0.5% to 1.2979
  • USD/CNH: -0.2% to 7.1215
  • USD/JPY: -0.4% to 151.98
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 246,000; prior 241,000) and Continuing Claims (prior 1.867 mln)
  • 9:45 ET: Flash October S&P Global U.S. Manufacturing PMI (prior 47.3) and flash S&P Global U.S. Services PMI (prior 55.2)
  • 10:00 ET: September New Home Sales (Briefing.com consensus 713,000; prior 716,000)
  • 10:30 ET: Weekly natural gas inventories (prior +76 bcf)