Bond Market Update

Short End Remains Behind

• U.S. Treasuries are on track for a lower start with shorter tenors set to continue their underperformance from Friday. Treasury futures slipped out of the gate, spending the bulk of the Asian session in a sideways range. Investor participation remained on the lower side as markets in China were closed for one more day and Australia's bond market was closed as well. Treasury futures slid to lows once the focus shifted to Europe, and they remain at their worst levels at this time with the 2s10s spread returning to a slight inversion. Elevated geopolitical fears remain in place, as the market watches the Iran-Israel conflict, while crude oil climbs to its best level in five weeks. The U.S. Dollar Index is down 0.1% at 102.45. Today's economic data will be limited to the 15:00 ET release of the Consumer Credit report for August (Briefing.com consensus $12.7 bln; prior $25.5 bln).
• Yield Check:
  • 2-yr: +8 bps to 4.01%
  • 3-yr: +7 bps to 3.91%
  • 5-yr: +5 bps to 3.86%
  • 10-yr: +2 bps to 4.00%
  • 30-yr: UNCH at 4.27%

• News:
  • Officials from China's National Development and Reform Commission will speak to the press about stimulus measures tomorrow.
  • Press reports from China have indicated some growth in home sales during the recent holiday week.
  • Bank of Japan's quarterly regional economic report maintained its view of seven regions while the assessment for two regions increased.
  • The Reserve Bank of New Zealand shadow board is split regarding the size of the expected rate cut on Wednesday.
  • The chief of staff for British Prime Minister Starmer resigned as part of a cabinet reshuffle.
  • European Central Bank policymaker Villeroy de Galhau said that the ECB is likely to cut rates again in October due to the rising risk of undershooting the 2.0% inflation target.
  • Germany's Economy Ministry expects that domestic GDP will contract 0.2% in 2024.
  • China's September FX Reserves reached $3.316 trln (expected $3.30 trln; last $3.288 trln).
  • Japan's August Leading Index fell to 106.7 from 109.3 (expected 107.2) and Coincident Indicator fell 3.7% m/m (last 3.1%). September FX Reserves reached $1.25 trln (last $1.24 trln).
  • South Korea's September FX Reserves reached $419.97 bln (last $415.92 bln).
  • Hong Kong's September FX Reserves reached $422.80 bln (last $423.50 bln).
  • Singapore's September FX Reserves reached $389.8 bln (last $384.6 bln).
  • Australia's October MI Inflation Gauge was up 0.1% m/m (last -0.1%).
  • Eurozone's October Sentix Investor Confidence rose to -13.8 from -15.4 (expected -14.6). August Retail Sales were up 0.2% m/m, as expected (last 0.0%), rising 0.8% yr/yr (expected 1.0%; last -0.1%).
  • Germany's August Factory Orders were down 5.8% m/m (expected -1.9%; last 3.9%).
  • U.K.'s September Halifax House Price Index was up 0.3% m/m (expected 0.2%; last 0.3%), rising 4.7% yr/yr (last 4.3%).
• Commodities:
  • WTI Crude: +2.3% to $76.10/bbl
  • Gold: +0.4% to $2678.40/ozt
  • Copper: +0.2% to $4.582/lb
• Currencies:
  • EUR/USD: UNCH at 1.0976
  • GBP/USD: -0.3% to 1.3082
  • USD/CNH: -0.4% to 7.0656 
  • USD/JPY: -0.3% to 148.29
• Data out Today:
  • 15:00 ET: August Consumer Credit (Briefing.com consensus $12.7 bln; prior $25.5 bln)