Bond Market Update

Steady Start Ahead

• U.S. Treasuries are on track for a slightly lower start after yesterday's holiday closure. Treasury futures faced some pressure during the Asian session on Monday, but the market has been in a steady recovery since then, interrupted briefly by yesterday's intraday closure. Treasury futures continued their rebound last evening, approaching their closing levels from Friday this morning. The overnight session was fairly quiet with a limited flow of news and economic data. Bank of Japan Governor Ueda reportedly said in a document submitted to the government that more rate hikes are likely if prices and the economy continue evolving in line with expectations. Elsewhere, South Korea's inflation returned to the Bank of Korea's 2.0% target in the August CPI report while France is facing a growing budget deficit. The U.S. session will see the release of the final S&P Global U.S. Manufacturing PMI for August (prior 49.6) at 9:45 ET, followed by the July Construction Spending report (Briefing.com consensus 0.2%; prior -0.3%) and the August ISM Manufacturing Index (Briefing.com consensus 47.5%; prior 46.8%) at 10:00 ET. Crude oil is falling back to its August low (71.46) while the U.S. Dollar Index is up 0.2% at 101.83.
• Yield Check:
  • 2-yr: +1 bp to 3.94%
  • 3-yr: +1 bp to 3.80%
  • 5-yr: UNCH at 3.72%
  • 10-yr: UNCH at 3.91%
  • 30-yr: UNCH at 4.20%

• News:
  • Some Japanese companies are delaying or cancelling their bond issuance plans ahead of the September policy meeting at the BoJ.
  • China will initiate an anti-dumping investigation into seed oil imports from Canada after Canada implemented a tariff on electric vehicles from China.
  • Sweden's Riksbank is on track for another three rate cuts this year, according to Governor Thedeen.
  • France's Finance Minister Le Maire warned that the country's budget deficit ratio to GDP could exceed 5.5%.
  • Volkswagen is planning to close some factories in Germany due to high energy prices and rising competition from China.
  • South Korea's August CPI was up 0.4% m/m (expected 0.3%; last 0.3%) and up 2.0% yr/yr, as expected (last 2.6%).
  • Australia's Q2 Current Account deficit reached AUD10.7 bln (expected deficit of AUD4.5 bln; last deficit of AUD6.3 bln).
  • New Zealand's Q2 Terms of Trade Index was up 2.1% qtr/qtr (expected 2.6%; last 5.1%). Q2 Import Prices rose 3.1% qtr/qtr (expected 0.5%; last -5.1%) and Export Prices rose 5.2% qtr/qtr (expected 2.8%; last -0.3%).
  • France's July budget deficit reached EUR156.8 bln (last deficit of EUR103.5 bln).
  • Spain's August Unemployment increased by 21,900 (expected 34,500; last -10,800).
  • Swiss August CPI was unchanged m/m (expected 0.1%; last -0.2%), rising 1.1% yr/yr (expected 1.2%; last 1.3%). Q2 GDP expanded 0.7% qtr/qtr (expected 0.5%; last 0.5%), growing 1.8% yr/yr (last 0.6%).
• Commodities:
  • WTI Crude: -1.5% to $72.41/bbl
  • Gold: -0.4% to $2518.80/ozt
  • Copper: -3.2% to $4.076/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1036
  • GBP/USD: -0.2% to 1.3122
  • USD/CNH: +0.3% to 7.1291
  • USD/JPY: -0.5% to 146.19
• Data out Today:
  • 9:45 ET: Final August S&P Global U.S. Manufacturing PMI (prior 49.6) 
  • 10:00 ET: July Construction Spending (Briefing.com consensus 0.2%; prior -0.3%) and August ISM Manufacturing (Briefing.com consensus 47.5%; prior 46.8%)