Bond Market Update

Slightly Lower Ahead of August PPI

• U.S. Treasuries are on track for a modestly lower start ahead of the 8:30 ET release of the August PPI report (Briefing.com consensus 0.2%), which will follow yesterday's slightly hotter than expected August Core CPI (0.3%; Briefing.com consensus 0.2%). Treasury futures dipped in early evening action, adding to their losses once the focus shifted to European trade in the early morning. European equities trade higher while sovereign debt is in the red ahead of the European Central Bank's expected 25-bps rate cut to its deposit facility rate and a 60-bps reduction to the main refinancing rate at 8:15 ET. The decision will be followed by ECB President Lagarde's press conference at 8:45 ET. Crude oil is building on yesterday's bounce off its 2024 low while the U.S. Dollar Index is little changed at 101.72.
• Yield Check:
  • 2-yr: +1 bp to 3.66%
  • 3-yr: +1 bp to 3.48%
  • 5-yr: +1 bp to 3.46%
  • 10-yr: +2 bps to 3.67%
  • 30-yr: +2 bps to 3.98%

• News:
  • The International Energy Agency lowered its 2024 global oil demand growth forecast to 903,000 barrels per day from 970,000 barrels.
  • Bank of Japan policymaker Tamura said that rate hike expectations are too low, adding that he sees a neutral rate around 1.00%.
  • There was some speculation that the People's Bank of China will lower its short-term reverse repurchase rate on Friday ahead of next week's mid-autumn festival.
  • The EU is reportedly looking to repurpose up to EUR350 bln of coronavirus-related debt.
  • The Bank of England noted that the implementation of Basel 3.1 rules will have a very small impact on capital requirements of British banks.
  • Japan's August PPI was down 0.2% m/m (expected 0.0%; last 0.5%) but up 2.5% yr/yr (expected 2.8%; last 3.0%). Q3 BSI Large Manufacturing Conditions rose to 4.5 from -1.0 (expected -2.5).
  • Hong Kong's Q2 Industrial Production was up 0.7% yr/yr (last 1.8%).
  • Australia's September MI Inflation Expectations slowed to 4.4% from 4.5%.
  • New Zealand's August Electronic Card Retail Sales were up 0.2% m/m (last -0.1%) but down 2.9% yr/yr (last -4.9%). August FPI was up 0.2% m/m (last 0.4%).
  • Germany's August WPI was down 0.8% m/m (expected 0.1%; last 0.3%), falling 1.1% yr/yr (last -0.1%).
  • Italy's Q2 Unemployment Rate fell to 6.8% from 7.2% (expected 7.1%).
  • Spain's August CPI was unchanged m/m, as expected (last -0.5%), rising 2.3% yr/yr (expected 2.2%; last 2.8%). August Core CPI was up 2.7% yr/yr, as expected (last 2.8%).
• Commodities:
  • WTI Crude: +1.6% to $68.36/bbl
  • Gold: +0.2% to $2546.70/ozt
  • Copper: +1.8% to $4.216/lb
• Currencies:
  • EUR/USD: UNCH at 1.1014
  • GBP/USD: UNCH at 1.3038 
  • USD/CNH: UNCH at 7.1274
  • USD/JPY: +0.2% to 142.56
• Data out Today:
  • 8:30 ET: August PPI (Briefing.com consensus 0.2%; prior 0.1%), Core PPI (Briefing.com consensus 0.2%; prior 0.1%), weekly Initial Claims (Briefing.com consensus 229,000; prior 227,000), and Continuing Claims (prior 1.838 mln)
  • 10:30 ET: Weekly natural gas inventories (prior +13 bcf) 
  • 14:00 ET: August Treasury Budget (prior -$243.7 bln)
• Treasury Auctions:
  • 13:00 ET: $22 bln 30-yr Treasury bond auction results