Bond Market Update

Falling Again

• U.S. Treasuries are on track for a lower start after last week's selling. Treasury futures slumped out of the gate on Sunday evening while crude oil plunged below $70/bbl toward its October low (66.33) after Israel's attack on Iran did not broaden the conflict between the two adversaries. Treasury futures made a run at their opening lows at the start of action in Europe, but the next four hours saw a steady rebound that reversed the bulk of overnight losses. Economic data flow was limited to start the week that will be capped with Friday's release of the Employment Situation report for October (Briefing.com consensus 120,000; prior 254,000). However, there were some noteworthy developments, like Japan's election, which resulted in the ruling coalition losing its majority in the lower house. That could spell the end of Prime Minister Ishiba's tenure after just a month in office. A diet session to vote on the fate of the prime minister has been called for November 11. In the U.S., there has been growing focus on former President Trump entertaining the idea of replacing income taxes with tariffs after he confirmed interest in the idea during a three-hour Friday conversation with podcasting giant Joe Rogan. The U.S. Dollar Index is down 0.1% at 104.18, sitting just shy of its best level since the end of July.
• Yield Check:
  • 2-yr: +1 bp to 4.11%
  • 3-yr: +2 bps to 4.06%
  • 5-yr: +3 bps to 4.08%
  • 10-yr: +3 bps to 4.26%
  • 30-yr: +2 bps to 4.52%

• News:
  • The People's Bank of China launched a reverse repurchase facility aimed at maintaining liquidity.
  • China's National People's Congress will be held between November 4 and 8.
  • Moody's affirmed France's Aa2 rating but lowered the outlook to Negative from Stable.
  • European Central Bank President Lagarde said that disinflation is on track, though a temporary inflationary uptick is expected in Q4 due to base effects related to energy prices.
  • Volkswagen is considering cost-saving measures, including wage cuts and freezes.
  • China's September Industrial Profit was down 3.5% YTD (last 0.5%).
  • Hong Kong's September trade deficit reached HKD53.2 bln (last deficit of HKD33.1 bln) as imports grew 1.4% m/m (last 7.9%) and exports rose 4.7% m/m (last 6.4%).
  • Spain's September Retail Sales were up 4.1% yr/yr (last 2.4%).
• Commodities:
  • WTI Crude: -5.9% to $67.53/bbl
  • Gold: -0.4% to $2743.70/ozt
  • Copper: -0.3% to $4.355/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0819
  • GBP/USD: +0.2% to 1.2990
  • USD/CNH: +0.1% to 7.1377
  • USD/JPY: +0.3% to 152.66
• No Data on Today's Schedule
• Treasury Auctions:
  • 11:30 ET: $69 bln 2-yr Treasury note auction results
  • 13:00 ET: $70 bln 5-yr Treasury note auction results