Bond Market Update

Steady Start Ahead of Busy Day

• U.S. Treasuries are on track for a modestly higher start ahead of today's sizable batch of data that will include the third revision to Q2 GDP (Briefing.com consensus 3.0%; prior 3.0%), Durable Orders for August (Briefing.com consensus -2.9%; prior 9.9%), the latest weekly jobless claims report (Briefing.com consensus 224,000; prior 219,000), and Pending Home Sales for August (Briefing.com consensus 1.0%; prior -5.5%). Treasury futures began inching higher last evening, accelerating their advance after the Asian session, which saw continued strength in Chinese equities with markets in Shanghai and Hong Kong gaining more than 3.5% apiece. China's Politburo pledged to spend enough to reach this year's growth targets while technology stocks rallied after strong results and guidance from chipmaker Micron (MU). Treasury futures reached their highs during the past hour with longer tenors showing slight relative strength ahead of today's $44 bln 7-yr note sale. Several Fed officials will speak today, including Chairman Powell at 9:20 ET. Crude oil is sliding back toward its September low (65.27) while the U.S. Dollar Index is down 0.1% at 100.85.
• Yield Check:
  • 2-yr: -1 bp to 3.54%
  • 3-yr: -2 bps to 3.47%
  • 5-yr: -1 bp to 3.51%
  • 10-yr: -1 bp to 3.77%
  • 30-yr: -1 bp to 4.12%

• News:
  • China plans to inject nearly $150 bln of capital into its largest banks.
  • Australia's treasurer will travel to China for the first time in seven years.
  • Japan's LDP leadership election will be held tomorrow.
  • The Swiss National Bank lowered its policy rate by 25 bps to 1.00% with more cuts likely to follow.
  • Several European Central Bank officials are reportedly pushing for another rate cut in October while others would prefer to wait until December.
  • The French government will reportedly ask the EU to grant a two-year extension for achieving the 3.0% deficit/GDP target.
  • Hong Kong's August trade deficit reached $33.1 bln (last deficit of $21.8 bln) as imports grew 7.9% m/m (last 9.9%) and exports rose 6.4% (last 13.1%).
  • Singapore's August Industrial Production rose 6.7% m/m (expected -4.0%; last 10.2%), jumping 21.0% yr/yr (expected 9.6%; last 2.0%).
  • Eurozone's August M3 Money Supply was up 2.9% yr/yr (expected 2.5%; last 2.3%). August Private Sector Loans rose 0.6% yr/yr, as expected (last 0.5%) and Loans to Nonfinancials rose 0.8% (last 0.6%).
  • Germany's October GfK Consumer Climate improved to -21.2 from -21.9 (expected -22.4).
  • Italy's September Business Confidence fell to 86.7 from 87.0 (expected 87.1) and Consumer Confidence rose to 98.3 from 96.1.
  • Spain's August Retail Sales were up 2.3% yr/yr (expected 1.9%; last 1.1%).
• Commodities:
  • WTI Crude: -3.0% to $67.57/bbl
  • Gold: +0.9% to $2707.60/ozt 
  • Copper: +2.2% to $4.587/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1152
  • GBP/USD: +0.4% to 1.3373
  • USD/CNH: -0.5% to 6.9945
  • USD/JPY: -0.3% to 144.21
• Data out Today:
  • 8:30 ET: Q2 GDP -- third estimate (Briefing.com consensus 3.0%; prior 3.0%), Q2 GDP Deflator -- third estimate (Briefing.com consensus 2.5%; prior 2.5%), August Durable Orders (Briefing.com consensus -2.9%; prior 9.9%), Durable Orders ex-transportation (Briefing.com consensus 0.1%; prior -0.2%), weekly Initial Claims (Briefing.com consensus 224,000; prior 219,000), and Continuing Claims (prior 1.829 mln)
  • 10:00 ET: August Pending Home Sales (Briefing.com consensus 1.0%; prior -5.5%)
  • 10:30 ET: Weekly natural gas inventories (prior +58 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results