Bond Market Update

Steady Start to New Week

• U.S. Treasuries began the week on a largely flat note after recovering their opening losses. The market faced some early pressure even though the night brought a reminder of poor manufacturing activity in several large economies as flash September Manufacturing PMI readings from Australia (46.7; prior 48.5), Germany (40.3; prior 42.4), and France (44.0; prior 43.9) remained in contraction. In addition, France's Services PMI (48.3; prior 55.0) fell into contraction while readings from Germany (50.6; prior 51.2) and the U.K. (52.8; prior 53.7) showed slowing growth. Accordingly, there was growing speculation about another rate cut from the European Central Bank, which is a sentiment that was echoed by a handful of Fed officials who discussed the prospect of more cuts from the FOMC as well. Treasuries slid to fresh lows after today's batch of data showed an ongoing expansion in the S&P Global U.S. Services PMI (55.4; prior 55.7), though at a slower pace than what was seen in August. The S&P Global U.S. Manufacturing PMI (47.0; prior 47.9), meanwhile, fit with the global trend. The early selling briefly lifted yields in the belly of the curve past last week's highs, but the market bounced alongside a sloppy open in equities, spending the second half of the session just below highs. Crude oil gave back some of last week's advance while the U.S. Dollar Index rose 0.1% to 100.82, staying just above a 14-month low.
• Yield Check:
  • 2-yr: +1 bp to 3.58%
  • 3-yr: UNCH at 3.47%
  • 5-yr: +1 bp to 3.50%
  • 10-yr: +1 bp to 3.74%
  • 30-yr: +1 bp to 4.08%

• News:
  • British Chancellor Reeves said that the Autumn budget will not call for austerity.
  • French Prime Minister Barnier ruled out raising taxes on all earners.
  • 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.
  • 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).
• Today's Data:
  • The S&P Global U.S. Manufacturing PMI hit 47.0 in the flash reading for September, down from 47.9 in August.
  • The S&P Global U.S. Services PMI hit 55.4 in the flash reading for September, down from 55.7 in August.
• Commodities:
  • WTI crude: -0.9% to $70.37/bbl
  • Gold: +0.3% to $2652.90/ozt 
  • Copper: +0.7% to $4.36/lb
• Currencies:
  • EUR/USD: -0.4% to 1.1117
  • GBP/USD: +0.2% to 1.3346
  • USD/CNH: +0.2% to 7.0564
  • USD/JPY: -0.3% to 143.38
• The Day Ahead:
  • 9:00 ET: July FHFA Housing Price Index (prior -0.1%) and July S&P Case-Shiller Home Price Index (Briefing.com consensus 6.0%; prior 6.5%)
  • 10:00 ET: September Consumer Confidence (Briefing.com consensus 102.9; prior 103.5)
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results