Bond Market Update

A Market Adrift

• U.S. Treasuries saw prices drift lower and yields move higher during the cash session. There simply wasn't much buying interest today in front of the September CPI report on Thursday. Notably, stock prices drifted higher as bond prices drifted lower, demonstrative perhaps of some asset reallocation activity as the stock market continues to run with its soft landing/rate cut optimism. The S&P 500 hit a new all-time high. Today's 10-yr note auction saw the high yield slightly tail the when-issued yield amid solid demand from indirect bidders. The FOMC Minutes for the September 17-18 meeting showed there was a decent discussion around cutting rates by only 25 basis points before the consensus formed around a 50-basis points cut. It was a good day for the dollar, evidenced by a 0.3% increase for the U.S. Dollar Index.
• Yield Check:
  • 2-yr: +3 bps to 4.01%
  • 3-yr: +3 bps to 3.92%
  • 5-yr: +4 bps to 3.90%
  • 10-yr: +3 bps to 4.06%
  • 30-yr: +4 bps to 4.34%

• News:
  • China's Ministry of Finance announced a briefing for Saturday, October 12, to discuss fiscal policy and economic development
  • The FOMC Minutes noted that, "Some participants noted that there had been a plausible case for a 25 basis point rate cut at the previous meeting"
  • Hurricane Milton (currently Category 4) expected to hit west-central cost of Florida tonight or early Thursday
  • New Zealand cut its overnight call rate by 50 basis points to 4.75%, as expected
  • The Reserve Bank of India left its repurchase rate unchanged at 6.50%, as expected, and changed its stance to neutral from withdrawal of accommodation
  • ECB member Villeroy pointed to the prospect of another rate cut at the October meeting
  • Dallas Fed President Logan (non-FOMC voter) said FOMC should not rush to reduce fed funds target to normal or neutral level
  • FTSE Russell announced South Korea bonds will be included in its WGBI Index, effective November 2025, and that India's bonds will be added to the FTSE Emerging Markets Government Bond Index, effective September 2025, according to Reuters
  • London-based Rio Tinto announced the acquisition of Arcadium Lithium for $6.7 billion, or $5.85 per share, in cash
  • Germany's trade balance in August was larger than expected on better demand from the U.S. and UK
  • Boeing withdraws contract offer for machinists and says further negotiations do not make sense at this point; S&P places on Credit Watch Negative
  • MBA weekly Mortgage Applications Index -5.1% wk/wk with refinance applications -9.0% and purchase applications flat
  • $39 billion 10-yr note auction results (prior 12-auction average)
    • High yield: 4.066% (4.256%)
    • Bid-to-cover: 2.48 (2.51)
    • Indirect bid: 77.6% (67.2%)
    • Direct bid: 8.4% (17.1%)
• Today's Data:
  • MBA weekly Mortgage Applications Index -5.1% wk/wk with refinance applications -9.0% and purchase applications flat
  • August Wholesale Inventories (Actual 0.1%; Briefing.com consensus 0.2%; prior 0.2%)
• Commodities:
  • WTI Crude: -0.5% to $73.33/bbl
  • Gold: -0.3% to $2626.40/ozt
  • Copper: -1.4% to $4.40/lb
• Currencies:
  • EUR/USD: -0.4% to 1.0936
  • GBP/USD: -0.3% to 1.3065
  • USD/CNH: +0.3% to 7.0959
  • USD/JPY: +0.8% to 149.33
• The Day Ahead:
  • 08:30 ET: Weekly Initial Jobless Claims (Briefing.com consensus 229K; prior 225K) and Continuing Jobless Claims (prior 1826K)
  • 08:30 ET: September CPI (Briefing.com consensus 0.1%; prior 0.2%) and core CPI (Briefing.com consensus 0.2%; prior 0.3%)
  • 10:30 ET: EIA Natural Gas Inventories (prior +55 bcf)
  • 14:00 ET: September Treasury Budget (prior -$380.1B)
• Treasury Auctions:
  • 13:00 ET: $22 bln 30-yr Treasury bond auction results