Bond Market Update

Ongoing Resilience on Display

• U.S. Treasuries are on track for a higher start that will reverse yesterday's losses at the open with shorter tenors leading the way. Treasury futures climbed in early evening action, accelerating to highs shortly after the start of the European session. The market pulled back over the past three hours but remains on track for a higher open. Overnight action saw a mixed showing from equities in Asia with Japan's Nikkei (-0.7%) ending the week on a soft note as the yen continued climbing against the dollar, reaching its best level since late December. Elsewhere, several European Central Bank policymakers voiced their concerns about inflation, stressing that the central bank has not committed to any decisions that will follow yesterday's rate cut. Crude oil has turned positive for the week while gold futures have reached a fresh record at $2601/ozt and the U.S. Dollar Index is down 0.3% at 101.09.
• Yield Check:
  • 2-yr: -6 bps to 3.59%
  • 3-yr: -4 bps to 3.44%
  • 5-yr: -4 bps to 3.43%
  • 10-yr: -3 bps to 3.65%
  • 30-yr: -2 bps to 3.98%

• News:
  • Markets in China, Japan, and South Korea will be closed on Monday with South Korea remaining closed through Wednesday while China's market will reopen on Wednesday.
  • There was ongoing speculation that roughly $5 trln worth of Chinese mortgages will be refinanced soon.
  • China will increase the retirement age for the first time since 1978.
  • South Korea plans to lift its short selling ban in March.
  • Japan's July Industrial Production was up 3.1% m/m (expected 2.8%; last -4.2%) and Capacity Utilization was up 2.5% m/m (last -3.1%).
  • South Korea's August Import Price Index rose 1.8% yr/yr (last 9.9%) and Export Price Index rose 5.7% yr/yr (last 13.0%).
  • New Zealand's August Business PMI hit 45.8 (last 44.4).
  • Eurozone's July Industrial Production was down 0.3% m/m (expected -0.6%; last -0.1%), falling 2.2% yr/yr (expected -2.7%; last -4.1%).
  • France's August CPI was up 0.5% m/m (expected 0.6%; last 0.2%), rising 1.8 yr/yr (expected 1.9%; last 2.3%).
• Commodities:
  • WTI Crude: +1.1% to $69.74/bbl
  • Gold: +0.5% to $2593.90/ozt
  • Copper: UNCH at $4.196/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1084
  • GBP/USD: UNCH at 1.3121
  • USD/CNH: -0.2% to 7.1028
  • USD/JPY: -0.7% to 140.83
• Data out Today:
  • 8:30 ET: August Import Prices (prior 0.1%), Import Prices ex-oil (prior 0.1%), Export Prices (prior 0.7%), and Export Prices ex-agriculture (prior 1.0%)
  • 10:00 ET: Preliminary September University of Michigan Consumer Sentiment (prior 67.9)