Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a lower start with issues in the belly set to show some early underperformance. Treasury futures spent the Asian session, which again saw reduced volume due to holidays in China and South Korea, in a sideways range, falling to lows once the focus shifted to Europe. The selling has taken place alongside weakness in other sovereign debt while British gilts outperform after Bank of England Governor Bailey said in a newspaper interview that the central bank can be more aggressive with cuts if inflation remains subdued. Final September Services PMI readings from major economies were generally better than expected with Japan's Services PMI expanding for the third consecutive month (53.1) while PMIs from Australia (50.5) and the eurozone (51.4) remained in expansion for the eighth month in a row. Crude oil trades higher while the U.S. Dollar Index is up 0.2% at 101.89.
• Yield Check:
  • 2-yr: +1 bp to 3.65%
  • 3-yr: +2 bps to 3.57%
  • 5-yr: +2 bps to 3.57%
  • 10-yr: +1 bp to 3.80%
  • 30-yr: +1 bp to 4.14%

• News:
  • There has been some focus on Japan's new Prime Minister Ishiba appearing to be more supportive of easy monetary policy than he was prior to assuming his new post.
  • Automakers Aston Martin, Stellantis, and Mercedes-Benz have been pressured by analyst downgrades.
  • Japan's September Services PMI hit 53.1 (expected 53.9; last 53.7).
  • Hong Kong's August Retail Sales were down 10.1% yr/yr (last -11.8%).
  • Australia's September Services PMI hit 50.5 (expected 50.6; last 52.5). August trade surplus reached AUD5.644 bln (expected surplus of AUD5.510 bln; last surplus of AUD5.636 bln) as imports dipped 0.2% m/m (last -0.6%) and exports also decreased by 0.2% m/m (last 0.3%).
  • Eurozone's September Services PMI hit 51.4 (expected 50.5; last 52.9). August PPI was up 0.6% m/m (expected 0.4%; last 0.7%) but down 2.3% yr/yr (expected -2.4%; last -2.2%).
  • Germany's September Services PMI hit 50.6, as expected (last 51.2).
  • U.K.'s September Services PMI hit 52.4 (expected 52.8; last 53.7).
  • France's September Services PMI hit 49.6 (expected 48.3; last 55.0).
  • Italy's September Services PMI hit 50.5 (expected 51.2; last 51.4).
  • Spain's September Services PMI hit 57.0 (expected 54.0; last 54.6).
  • Swiss September CPI was down 0.3% m/m (expected -0.1%; last 0.0%) but up 0.8% yr/yr (expected 1.1%; last 1.1%).
• Commodities:
  • WTI Crude: +1.5% to $71.20/bbl
  • Gold: -0.1% to $2667.80/ozt
  • Copper: -1.5% to $4.58/lb
• Currencies:
  • EUR/USD: UNCH at 1.1043
  • GBP/USD: -1.2% to 1.3114
  • USD/CNH: +0.2% to 7.0434
  • USD/JPY: +0.2% to 146.65
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 223,000; prior 218,000) and Continuing Claims (prior 1.834 mln)
  • 9:45 ET: Final September S&P Global U.S. Services PMI (prior 55.7)
  • 10:00 ET: August Factory Orders (Briefing.com consensus 0.1%; prior 5.0%) and September ISM Non-Manufacturing Index (Briefing.com consensus 51.6%; prior 51.5%)
  • 10:30 ET: Weekly natural gas inventories (prior +47 bcf)