Bond Market Update

Inching Higher Ahead of August Income Data

• U.S. Treasuries are on track for a slightly higher start after a rangebound night in the futures market. Treasury futures faced some light pressure in early Asian trade, but the losses were reversed once the focus turned to Europe. The biggest news of the night came from Japan, where Shigeru Ishiba, who supports the Bank of Japan's tightening campaign, will become the country's next prime minister after winning the LDP leadership contest. The market received another reminder about sluggish growth in China after year-to-date industrial profit growth fell to just 0.5% in August after being up 3.6% in July. Elsewhere, there was growing speculation about another imminent rate cut from the European Central Bank after flash September CPI readings from France (-1.2%; expected -0.7%) and Spain (-0.6%; expected -0.1%) showed deflation in prices, bringing their respective yr/yr growth rates well below the European Central Bank's 2.0% target. The U.S. session will feature the release of the Personal Income/Outlays report for August, which will also include the Fed's preferred inflation gauge. Crude oil is fighting to stay above its September low while the U.S. Dollar Index is little changed at 100.50.
• Yield Check:
  • 2-yr: UNCH at 3.62%
  • 3-yr: -1 bp to 3.53%
  • 5-yr: -1 bp to 3.55%
  • 10-yr: -1 bp to 3.78%
  • 30-yr: -1 bp to 4.11%

• News:
  • Australia's Treasurer Chalmers said that cooperation with China on investment, trade, and decarbonization will be increased.
  • European Central Bank policymaker Schnabel discussed softening labor market conditions and a stagnating economy, fueling speculation about the next rate cut being around the corner.
  • There was speculation that the new French government will push for renewed merger talks between Renault and Stellantis.
  • China's August Industrial Profit was up 0.5% YTD (last 3.6%).
  • Japan's September Tokyo CPI was down 0.2% m/m (last 0.5%) but up 2.2% yr/yr (last 2.6%). September Tokyo Core CPI was up 2.0%, as expected (last 2.4%). July Leading Index rose to 109.3 from 109.1 (expected 109.5) and Coincident Indicator rose 3.1% m/m (expected 3.0%; last -3.9%).
  • South Korea's August Manufacturing BSI Index fell to 69 from 71.
  • Eurozone's September Business and Consumer Survey dipped to 96.2 from 96.5 (expected 96.5).
  • Germany's September unemployment increased by 17,000 (expected 13,000; last 4,000) while the Unemployment Rate remained at 6.0%, as expected.
  • U.K.'s September CBI Distributive Trades Survey rose to 4 from -27 (expected -17).
  • France's flash September CPI was down 1.2% m/m (expected -0.7%; last 0.5%) but up 1.2% yr/yr (expected 1.6%; last 1.8%). August PPI was up 0.2% m/m (last 0.3%) but down 6.3% yr/yr (last -5.7%). August Consumer Spending was up 0.2% m/m (expected -0.1%; last 0.2%).
  • Italy's July Industrial Sales were down 0.4% m/m (last -0.4%), falling 4.7% yr/yr (last -4.4%). August PPI was up 0.7% m/m (last 1.3%) but down 0.8% yr/yr (last -1.1%).
  • Spain's September CPI was down 0.6% m/m (expected -0.1%; last 0.0%) but up 1.5% yr/yr (expected 1.9%; last 2.3%). September Core CPI was up 2.4% yr/yr (last 2.7%). September Business Confidence improved to -0.7 from -3.6. Q2 GDP expanded 0.8% qtr/qtr, as expected (last 0.8%), growing 3.1% yr/yr (expected 2.9%; last 2.9%).
• Commodities:
  • WTI Crude: +0.4% to $67.95/bbl 
  • Gold: -0.2% to $2690.90/ozt
  • Copper: -0.6% to $4.613/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1163
  • GBP/USD: -0.2% to 1.3388
  • USD/CNH: +0.2% to 6.9848
  • USD/JPY: -1.2% to 143.06
• Data out Today:
  • 8:30 ET: August Personal Income (Briefing.com consensus 0.4%; prior 0.3%), Personal Spending (Briefing.com consensus 0.3%; prior 0.5%), PCE Prices (Briefing.com consensus 0.1%; prior 0.2%), Core PCE Prices (Briefing.com consensus 0.2%; prior 0.2%), August advance goods trade balance (prior -$102.7 bln), August advance Retail Inventories (prior 0.8%), and August advance Wholesale Inventories (prior 0.3%)
  • 10:00 ET: Final September University of Michigan Consumer Sentiment (Briefing.com consensus 69.0; prior 69.0)