Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a slightly lower start that will reverse a portion of yesterday's gains. Treasury futures dipped in early evening action, seeing additional pressure at the start of the European session. The market attempted a bounce during the next couple hours before finding resistance that sent action back to early-morning lows. The selling has coincided with weakness in other sovereign debt while European equities are little changed. Economic data released overnight showed an acceleration in China's Caixin Services PMI for October (52.0) with activity improving to its fastest pace since July. The U.S. session will also see the release of the final Services PMI for October, followed by the October ISM Services report (Briefing.com consensus 53.5%; prior 54.9%). Crude oil is building on yesterday's advance while the U.S. Dollar Index is down 0.2% at 103.73.
• Yield Check:
  • 2-yr: +1 bp to 4.19%
  • 3-yr: +1 bp to 4.16%
  • 5-yr: +2 bps to 4.19%
  • 10-yr: +2 bps to 4.33%
  • 30-yr: +1 bp to 4.50%

• News:
  • The Reserve Bank of Australia left its cash rate at 4.35%, as expected, and Governor Bullock said that the last part of bringing down inflation is not easy.
  • Political parties in Germany are struggling to reach an agreement that would avert a collapse of the ruling coalition.
  • Ireland's Prime Minister is expected to call a general election this week.
  • China's October Caixin Services PMI hit 52.0 (expected 50.5; last 50.3).
  • Japan's October Monetary Base was unchanged yr/yr (expected 0.3%; last 0.1%).
  • South Korea's October CPI was unchanged m/m (expected 0.2%; last 0.1%), rising 1.3% yr/yr (expected 1.4%; last 1.6%).
  • Hong Kong's October Manufacturing PMI hit 52.2 (last 50.0).
  • Singapore's September Retail Sales rose 0.4% m/m (last 0.8%), increasing 2.0% yr/yr (last 0.7%).
  • Australia's October Services PMI hit 51.0 (expected 50.6; last 50.5).
  • U.K.'s October Services PMI hit 52.0 (expected 51.8; last 52.4).
  • France's September Industrial Production fell 0.9% m/m (expected -0.5%; last 1.1%) and September government budget deficit hit EUR173.8 bln (last deficit of EUR171.9 bln).
  • Spain's October unemployment increased by 26,800 (expected 26,500; last 3,200).
  • Swiss October Unemployment Rate remained at 2.6%, as expected.
• Commodities:
  • WTI Crude: +0.8% to $72.01/bbl
  • Gold: +0.1% to $2748.10/ozt
  • Copper: +0.7% to $4.461/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0896
  • GBP/USD: +0.2% to 1.2985 
  • USD/CNH: UNCH at 7.1074
  • USD/JPY: +0.1% to 152.28
• Data out Today:
  • 8:30 ET: September Trade Balance (Briefing.com consensus -$74.0 bln; prior -$70.4 bln)
  • 9:45 ET: Final October S&P Global Services PMI (prior 55.2) 
  • 10:00 ET: October ISM Services (Briefing.com consensus 53.5%; prior 54.9%)
• Treasury Auctions:
  • 13:00 ET: $42 bln 10-yr Treasury note auction results