Bond Market Update

Strong Auction Sustains Intraday Bounce

• U.S. Treasuries finished Tuesday on a mixed note after rising off their intraday lows. The trading day started with another retreat that was extended during the initial hour of trade, but the market jumped back to its starting levels after today's second batch of data featured a Job Openings and Labor Turnover Survey for September (7.443 mln; prior revised to 7.861 from 8.040 mln), which showed a downward revision to the reading from August and another decrease in September that left the total at its lowest level since early 2021. The report was released alongside a strong Consumer Confidence report for October (108.7; Briefing.com consensus 99.0; prior 99.2) which sent Treasuries back toward lows. However, another wave of buying boosted action off lows in the afternoon, in response to a strong $44 bln 7-yr note sale that made for a welcome respite from recent all-around weakness in auction demand and intraday trade. The post-auction bounce continued into late trade, leaving the market on highs at cash close. Crude oil finished modestly lower after failing to hang onto an overnight gain while the U.S. Dollar Index touched a three-month high before returning to little changed at 104.31.
• Yield Check:
  • 2-yr: -2 bps to 4.12%
  • 3-yr: -1 bp to 4.08%
  • 5-yr: UNCH at 4.10%
  • 10-yr: UNCH at 4.27%
  • 30-yr: -1 bp to 4.52%

• News:
  • The Atlanta Fed's GDPNow forecast for Q4 GDP was lowered to 2.8% from 3.3% in the previous estimate.
  • Japan's Prime Minister Ishiba is attempting to form a new ruling coalition but is facing resistance from the leader of the party that he is seeking an alliance with.
  • The Chinese government will purchase more electric vehicles to support the industry.
  • China State Council announced that more support will be provided for families with multiple children.
  • The German Chamber of Commerce and Industry lowered its domestic growth forecast for 2024 to -0.2% from 0.0%.
  • BP and Lufthansa reported a decrease in their respective profits for Q3.
  • European Central Bank policymaker De Guindos acknowledged that inflation is headed in the right direction while growth is not.
  • Japan's September jobs/applications ratio rose to 1.24 from 1.23 (expected 1.23) and September Unemployment Rate fell to 2.4% from 2.5% (expected 2.5%).
  • Singapore's Q3 Unemployment Rate fell to 1.8% from 2.0%.
  • Germany's November GfK Consumer Climate improved to -18.3 from -21.0 (expected -20.4).
  • U.K.'s September BoE Consumer Credit reached GBP1.213 bln (expected GBP1.40 bln; last GBP1.352 bln). September net lending to individuals reached GBP3.80 bln (expected GBP4.10 bln; last GBP4.156 bln) and Mortgage Approvals hit 65,650 (expected 65,000; last 64,960).
• Today's Data:
  • The Conference Board's Consumer Confidence Index jumped to 108.7 in October (Briefing.com consensus 99.0) from an upwardly revised 99.2 (from 98.7) in September. The increase in October marked the strongest monthly gain since March 2021.
    • The key takeaway from the report is that the increase in confidence in October was broad-based across all age groups and most income groups, and featured a substantially more optimistic view about future business conditions than the prior month. That sets up to be a supportive component for consumer spending.
  • Job openings decreased to 7.443 million in September from a downwardly revised 7.861 million (from 8.040 million) in August. 
  • The FHFA Housing Price Index was up 0.3% in August after increasing a revised 0.2% (from 0.1%) in July.
  • S&P Case-Shiller Home Price Index rose 5.2% in August (Briefing.com consensus 5.1%) after increasing 5.9% in July.
  • The advance goods trade deficit widened to $108.2 billion in September from $94.2 billion in August.
  • Advance Wholesale Inventories decreased by 0.1% in September after increasing 0.1% in August.
  • Advance Retail Inventories increased 0.8% in September after increasing a revised 0.7% (from 0.5%) in August.
  • $44 bln 7-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.215% (4.252%).
    • Bid-to-cover: 2.74 (2.53).
    • Indirect bid: 72.0% (69.1%). 
    • Direct bid: 20.6% (17.2%).
• Commodities:
  • WTI crude: -0.3% to $67.21/bbl 
  • Gold: +0.9% to $2781.30/ozt
  • Copper: UNCH at $4.36/lb
• Currencies:
  • EUR/USD: UNCH at 1.0814
  • GBP/USD: +0.3% to 1.3005
  • USD/CNH: +0.1% to 7.1454
  • USD/JPY: +0.1% to 153.39
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -6.7%)
  • 8:15 ET: October ADP Employment Change (Briefing.com consensus 105,000; prior 143,000)
  • 8:30 ET: Advance Q3 GDP (Briefing.com consensus 3.0%; prior 3.0%) and advance Q3 GDP Chain Deflator (Briefing.com consensus 2.3%; prior 2.5%)
  • 10:00 ET: September Pending Home Sales (Briefing.com consensus 2.5%; prior 0.6%)
  • 10:30 ET: Weekly crude oil inventories (prior +5.47 mln)