Bond Market Update

Long End Behind

• Longer-dated U.S. Treasuries are on track for a lower start to the week while the short end is expected to show some relative strength in the early going. Treasury futures retreated during the Asian session, which lacked the participation of Japan's market due to a holiday, but the modest overnight losses were largely reversed once the focus shifted to action in Europe. The market received flash Manufacturing and Services PMI readings from major economies with Australia's Manufacturing PMI (46.7) remaining in contraction while Services PMI (50.6) expanded at a slight pace. Similarly, eurozone's Manufacturing PMI (44.8; prior 45.8) contracted at an accelerating rate while Services PMI growth (50.5; prior 52.9) decelerated to a near-standstill, boosting speculation about another rate cut from the European Central Bank. Crude oil is on course for a modestly higher start to the week while the U.S. Dollar Index is up 0.2% at 100.92.
• Yield Check:
  • 2-yr: +1 bp to 3.58%
  • 3-yr: +1 bp to 3.48%
  • 5-yr: +2 bps to 3.50%
  • 10-yr: +2 bps to 3.75%
  • 30-yr: +3 bps to 4.10%

• News:
  • The People's Bank of China lowered its 14-day reverse repurchase rate by ten basis points to 1.85%.
  • The U.S. will look to ban vehicle software and hardware made in China.
  • The Reserve Bank of Australia will meet overnight but a policy change is not expected at this time.
  • British Chancellor Reeves said that the Autumn budget will not call for austerity.
  • French Prime Minister Barnier ruled out raising taxes on all earners.
  • India's flash September Manufacturing PMI hit 56.7 (last 57.5) and flash Services PMI hit 58.9 (last 60.9).
  • Singapore's August CPI was up 0.7% m/m (last -0.3%), rising 2.2% yr/yr, as expected (last 2.4%). August Core CPI was up 2.7% yr/yr (expected 2.5%; last 2.5%).
  • Australia's flash September Manufacturing PMI hit 46.7 (last 48.5) and flash Services PMI hit 50.6 (last 52.5). 
  • New Zealand's August trade deficit reached NZD2.20 bln (expected deficit of NZD155 mln; last deficit of NZD1.02 bln).
  • Eurozone's flash September Manufacturing PMI hit 44.8 (expected 45.7; last 45.8) and flash Services PMI hit 50.5 (expected 52.3; last 52.9).
  • Germany's flash September Manufacturing PMI hit 40.3 (expected 42.4; last 42.4) and flash Services PMI hit 50.6 (expected 51.1; last 51.2).
  • U.K.'s flash September Manufacturing PMI hit 51.5 (expected 52.3; last 52.5) and flash Services PMI hit 52.8 (expected 53.5; last 53.7). September CBI Industrial Trends Orders fell to -35 from -22 (expected -23).
  • France's flash September Manufacturing PMI hit 44.0 (expected 44.3; last 43.9) and flash Services PMI hit 48.3 (expected 53.0; last 55.0).
• Commodities:
  • WTI Crude: +0.4% to $71.31/bbl
  • Gold: UNCH at $2647.20/ozt
  • Copper: -0.5% to $4.318/lb
• Currencies:
  • EUR/USD: -0.4% to 1.1121
  • GBP/USD: -0.1% to 1.3313
  • USD/CNH: +0.2% to 7.0574
  • USD/JPY: -0.1% to 143.61
• Data out Today:
  • 9:45 ET: Flash September S&P Global U.S. Manufacturing PMI (prior 47.9) and flash September S&P Global U.S. Services PMI (prior 55.7)