Bond Market Update

Extending Monday Bounce

• U.S. Treasuries are on track for a higher start with issues in the belly expected to show relative strength in the early going. Treasury futures spent the bulk of the night in a narrow range, rallying to highs alongside other sovereign debt after Russia warned that the just-approved Ukrainian use of U.S. munitions inside Russian territory will result in "an appropriate and tangible" response, fueling fears of a broader conflict. The safe-haven rally has also resulted in pressure on European equities and U.S. equity futures. Gold has also received a bid, extending yesterday's rally off a two-month low, while crude oil is giving some of its big gain from yesterday. The U.S. Dollar Index, meanwhile, is up 0.2% at 106.49, staying just below its highest level in more than a year. Today's economic data will be limited to the 8:30 ET release of Housing Starts (Briefing.com consensus 1.340 mln; prior 1.354 mln) and Building Permits (Briefing.com consensus 1.441 mln; prior 1.428 mln) for October.
• Yield Check:
  • 2-yr: -4 bps to 4.24%
  • 3-yr: -5 bps to 4.20%
  • 5-yr: -5 bps to 4.23%
  • 10-yr: -4 bps to 4.37%
  • 30-yr: -5 bps to 4.56%

• News:
  • The leader of Japan's opposition party said that the goal is to approve the proposed economic package, that is expected to be bigger than last year's additional spending plan of JPY13 trln, by the end of the week.
  • The Reserve Bank of Australia expects that inflation will not make a sustainable return to target until 2026, according to its latest policy Minutes.
  • Multiple Chinese government and bank officials spoke in favor of expanding the market access for equities and bonds in Hong Kong.
  • Bank of England policymaker Greene warned against cutting rates too quickly due to a concern that the recently proposed budget will boost inflation.
  • European Central Bank policymaker Panetta said that a tightening bias is no longer needed in the eurozone.
  • Eurozone's October CPI was up 0.3% m/m, as expected (last -0.1%), rising 2.0% yr/yr, as expected (last 2.0%). Core CPI was up 0.2% m/m, as expected (last 0.2%), rising 2.7% yr/yr, as expected (last 2.7%). September Current Account surplus reached EUR37.0 bln (expected surplus of EUR27.0 bln; last surplus of EUR31.5 bln).
  • Spain's October Consumer Confidence fell to 79.6 from 84.8.
  • Swiss October trade surplus reached CHF8.063 bln (expected surplus of CHF4.25 bln; last surplus of CHF4.942 bln).
• Commodities:
  • WTI Crude: -0.4% to $68.87/bbl
  • Gold: +0.9% to $2638.20/ozt
  • Copper: -0.5% to $4.102/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0571
  • GBP/USD: -0.3% to 1.2643
  • USD/CNH: +0.2% to 7.2401
  • USD/JPY: -0.4% to 154.02
• Data out Today:
  • 8:30 ET: October Housing Starts (Briefing.com consensus 1.340 mln; prior 1.354 mln) and Building Permits (Briefing.com consensus 1.441 mln; prior 1.428 mln)