Bond Market Update

Ticking Lower

• U.S. Treasuries are on track for a modestly lower star after yesterday's intraday show of resilience that was paced by shorter tenors. Treasury futures began inching lower in early evening action, accelerating their retreat after the focus shifted to Europe. Markets in China and Hong Kong received more policy support as the People's Bank of China announced that the medium-term lending facility rate will be lowered by 30 basis points to 2.00%. Treasury futures continued sliding through the early part of the European session, which has been quiet, though it is worth noting that Sweden's central bank announced a rate cut, hinting at more reductions in the coming months. The U.S. session will see a light economic data slate with August New Home Sales (Briefing.com consensus 695,000) set to be reported at 10:00 ET. Later in the day, the U.S. Treasury will sell $70 bln in 5-yr notes. Crude oil is giving back some of yesterday's gain while the U.S. Dollar Index is little changed at 100.50.
• Yield Check:
  • 2-yr: -1 bp to 3.54%
  • 3-yr: +2 bps to 3.47%
  • 5-yr: +2 bps to 3.50%
  • 10-yr: +2 bps to 3.76%
  • 30-yr: +2 bps to 4.11%

• News:
  • Car dealers in China are struggling with high inventories and weak demand.
  • Standard & Poor's affirmed Australia's AAA rating with a Stable outlook.
  • Riksbank lowered its policy rate by 25 basis points to 3.25% and hinted at a faster pace of easing in the coming months.
  • European Central Bank policymaker Knot said that the ECB is likely to continue easing through the first half of next year.
  • European Central Bank policymaker Nagel said that Germany's economy will eventually improve, though major reforms are still needed.
  • Software company SAP is being investigated by U.S. authorities over alleged price fixing.
  • Spain is maintaining its target for a 2.5% deficit in 2025.
  • Japan's September Corporate Services Price Index was up 2.7% yr/yr (expected 2.6%; last 2.7%) and July BoJ Core CPI was up 1.8% yr/yr, as expected (last 1.8%).
  • South Korea's September Consumer Confidence fell to 100.0 from 100.8.
  • Australia's August CPI was up 2.7%, as expected (last 3.5%).
  • France's September Consumer Confidence rose to 95 from 93 (expected 92).
  • Spain's August PPI was down 1.3% yr/yr (last -1.6%). · Swiss September ZEW Expectations fell to -8.8 from -3.4.
• Commodities:
  • WTI Crude: -1.2% to $70.70/bbl
  • Gold: +0.2% to $2681.40/ozt
  • Copper: -0.5% to $4.468/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1194
  • GBP/USD: -0.3% to 1.3372
  • USD/CNH: +0.3% to 7.0294
  • USD/JPY: +0.8% to 144.34
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 11.0%; prior 14.2%)
  • 10:00 ET: August New Home Sales (Briefing.com consensus 695,000; prior 739,000)
  • 10:30 ET: Weekly crude oil inventories (prior -1.63 mln)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results