Bond Market Update

Looking to Bounce

• U.S. Treasuries are on track for a modestly higher start in most tenors after four days of selling pressure lifted yields to levels from August. Treasury futures climbed in early evening action, reaching highs near the midpoint of the Asian session. The next few hours saw a sideways drift, followed by a return to levels from early evening action. Overnight action featured some volatility in Asia, as China's Shanghai Composite (+4.6%) gapped higher after returning from a week-long closure, but the index fell sharply from its opening high after China's National Development and Reform Commission held a press conference about the implementation of stimulus, but did not announce additional measures. Meanwhile in Europe, action has been on the quiet side with the major averages trading in the red. Crude oil is reversing some of yesterday's advance as it finds resistance near its 200-day moving average (77.44) while the U.S. Dollar Index is down 0.1% at 102.40.
• Yield Check:
  • 2-yr: -4 bps to 3.96%
  • 3-yr: -2 bps to 3.88%
  • 5-yr: -2 bps to 3.85%
  • 10-yr: UNCH at 4.03%
  • 30-yr: UNCH at 4.31%

• News:
  • The Reserve Bank of Australia did not consider a rate hike in September, according to the latest policy minutes.
  • Japan's August Household Spending was up 2.0% m/m (expected 0.5%; last -1.7%) but down 1.9% yr/yr (expected -2.6%; last 0.1%). August Overall wage income was up 3.0% yr/yr, as expected (last 3.4%) and Overtime Pay was up 2.6% yr/yr (expected -2.5%; last -0.2%). August Current Account surplus reached JPY3.02 trln (expected surplus of JPY2.43 trln; last surplus of JPY2.80 trln). September Economy Watchers Current Index hit 47.8 (expected 49.3; last 49.0).
  • South Korea's August Current Account surplus reached $6.60 bln (last surplus of $8.97 bln).
  • Australia's October Westpac Consumer Sentiment was up 6.2% (last -0.5%) and ANZ Job Advertisements were up 1.6% m/m (last -1.8%). September NAB Business Survey rose to 7 from 3 and Business Confidence rose to -2 from -5.
  • Germany's August Industrial Production was up 2.9% m/m (expected 0.8%; last -2.9%) but down 2.5% yr/yr (last -5.8%).
  • France's August trade deficit reached EUR7.4 bln (expected deficit of EUR5.5 bln; last deficit of EUR6.0 bln).
• Commodities:
  • WTI Crude: -2.3% to $75.38/bbl
  • Gold: +0.2% to $2670.70/ozt
  • Copper: -2.6% to $4.447/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0989
  • GBP/USD: +0.2% to 1.3106
  • USD/CNH: -0.2% to 7.0539
  • USD/JPY: -0.2% to 147.84
• Data out Today:
  • 6:00 ET: September NFIB Small Business Optimism (actual 91.5; prior 91.2)
  • 8:30 ET: August Trade Balance (Briefing.com consensus -$71.3 bln; prior -$78.8 bln)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results