Bond Market Update

Waiting for Powell

• U.S. Treasuries are on track for a slightly higher start after a quiet night in the futures market. Treasury futures held their ground in early evening action, facing some light pressure during the Asian session. Bank of Japan Governor Ueda said during his parliamentary appearance that there is no difference of opinion between him and Deputy Governor Uchida, who recently said that the BoJ will not hike during market instability. On a related note, Japan's July CPI report showed that core-core CPI slipped below the BoJ's 2.0% target for the first time in nearly two years. Treasury futures saw a bit more selling once the focus shifted to Europe, followed by a shallow bounce in recent trade. Today's main event will be Fed Chairman Powell's speech at 10:00 ET, which is likely to influence the market's rate cut expectations, though the fed funds futures market is essentially certain that at least a 25 bps rate cut will be announced on September 18. Crude oil is adding to yesterday's advance while the U.S. Dollar Index is down 0.1% at 101.40.
• Yield Check:
  • 2-yr: -1 bp to 4.00%
  • 3-yr: -1 bp to 3.81%
  • 5-yr: -2 bps to 3.71%
  • 10-yr: -1 bp to 3.85%
  • 30-yr: -1 bp to 4.12%

• News:
  • Chinese officials are reportedly planning tariffs for vehicles with large engines.
  • European Central Bank policymaker Kazaks said that he is open to a discussion about a September rate cut and that policy would remain restrictive even after a couple additional cuts.
  • The latest consumer expectations survey from the eurozone showed that year-ahead CPI expectations ticked up to 2.8% from 2.7% while the three-year outlook rose to 2.4% from 2.3%.
  • Japan's July National CPI was up 0.2% m/m (last 0.3%), rising 2.8% yr/yr (last 2.8%). July National Core CPI was up 2.7% yr/yr, as expected (last 2.6%).
  • Singapore's July CPI was down 0.3% m/m (last -0.2%) but up 2.4% yr/yr (expected 2.5%; last 2.4%). July Core CPI was up 2.5% yr/yr (expected 2.9%; last 2.9%).
  • New Zealand's Q2 Retail Sales were down 1.2% qtr/qtr (expected -1.0%; last 0.4%) and Core Retail Sales were down 1.0% qtr/qtr (expected -0.8%; last 0.3%).
  • France's August Business Survey rose to 99 from 95 (expected 96).
• Commodities:
  • WTI Crude: +1.7% to $74.28/bbl
  • Gold: +0.8% to $2536.20/ozt
  • Copper: +0.5% to $4.168/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1120
  • GBP/USD: +0.2% to 1.3117
  • USD/CNH: -0.1% to 7.1409 
  • USD/JPY: -0.1% to 146.02
• Data out Today:
  • 10:00 ET: July New Home Sales (Briefing.com consensus 628,000; prior 617,000)
• Fed Speakers:
  • 10:00 ET: Fed Chairman Powell at Jackson Hole Economic Symposium