Bond Market Update

Padding Tuesday Gains

• U.S. Treasuries are on track for a modestly higher start with shorter tenors expected to lead the early advance after a night that saw a poor showing in global equities. Treasury futures began inching higher in early evening action, continuing their advance into the night. The market reached its best level shortly after the start of the European session, followed by some light backtracking. The advance in Treasury futures took place alongside gains in other sovereign debt while equities struggled with chipmakers at the forefront of the selling. As for economic news, China's Caixin Services PMI for August showed a larger than expected deceleration in the pace of growth (51.6; expected 51.9) while Japan's Services PMI also showed below-consensus growth (53.7; expected 54.0). Elsewhere, the final August Services PMI reading for the eurozone showed below-consensus growth (52.9; expected 53.3) while the U.K.'s reading (53.7; expected 53.3) exceeded expectations. Crude oil is on the rise after a brief slip past its January low while the U.S. Dollar Index is down 0.1% at 101.70.
• Yield Check:
  • 2-yr: -5 bps to 3.84%
  • 3-yr: -4 bps to 3.70%
  • 5-yr: -4 bps to 3.62%
  • 10-yr: -3 bps to 3.81%
  • 30-yr: -3 bps to 4.10%

• News:
  • The secretary general of Japan's LDP entered the leadership race to replace outgoing Prime Minister Kishida.
  • Germany's Kiel Institute for the World Economy lowered its domestic growth forecast for 2024 to 0.1% from 0.2% while the outlook for 2025 was reduced to 0.5% from 1.1%.
  • China's August Caixin Services PMI hit 51.6 (expected 51.9; last 52.1). 
  • Japan's August Services PMI hit 53.7 (expected 54.0; last 53.7).
  • Hong Kong's August Manufacturing PMI hit 49.4 (last 49.5).
  • India's August Services PMI hit 60.9 (expected 60.4; last 60.3).
  • Australia's Q2 GDP expanded 0.2% qtr/qtr, as expected (last 0.2%), growing 1.0% yr/yr, as expected (last 1.3%). August Services PMI hit 52.5 (expected 52.2; last 50.4). August AIG Construction Index fell to -38.1 from -23.2 and AIG Manufacturing Index fell to -30.8 from -19.5.
  • Eurozone's July PPI was up 0.8% m/m (expected 0.3%; last 0.6%) but down 2.1% yr/yr (expected -2.5%; last -3.3%). August Services PMI hit 52.9 (expected 53.3; last 51.9).
  • Germany's August Services PMI hit 51.2 (expected 51.4; last 52.5).
  • U.K.'s August Services PMI hit 53.7 (expected 53.3; last 52.5).
  • France's August Services PMI hit 55.0, as expected (last 50.1).
  • Italy's August Services PMI hit 51.4 (expected 52.5; last 51.7).
  • Spain's August Services PMI hit 54.6 (expected 54.8; last 53.9).
• Commodities:
  • WTI Crude: +1.1% to $71.13/bbl
  • Gold: -0.1% to $2519.90/ozt
  • Copper: -0.6% to $4.07/lb
• Currencies:
  • EUR/USD: UNCH at 1.1049
  • GBP/USD: +0.1% to 1.3119
  • USD/CNH: UNCH at 7.1179
  • USD/JPY: -0.4% to 144.88
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 1.6%; prior 0.5%)
  • 8:30 ET: July Trade Balance (Briefing.com consensus -$78.5 bln; prior -$73.1 bln)
  • 10:00 ET: July Factory Orders (Briefing.com consensus 4.5%; prior -3.3%) and July job openings (prior 8.184 mln)
  • 14:00 ET: September Fed Beige Book