Bond Market Update

Quiet Start Ahead

• U.S. Treasuries are on track for a flat start after a couple days of solid gains that lifted action toward highs from early August. The overnight session was calm, as futures navigated a sideways range with a slight downward bias. Global investor sentiment remained tentative after a shaky showing in U.S. equities with elevated anticipation ahead of Friday's release of the U.S. Employment Situation report for August (Briefing.com consensus 165,000; prior 114,000). A Bank of Japan official defended the decision to raise rates in July while Reserve Bank of Australia Governor Bullock warned that tighter policy may become warranted if Australia's inflation fails to decelerate. The U.S. session will feature a sizable batch of economic data, starting with the ADP Employment Change report for August (Briefing.com consensus 150,000; prior 122,000) at 8:15 ET. Crude oil is fighting to snap a three-day skid while the U.S. Dollar Index is down 0.2% at 101.19.
• Yield Check:
  • 2-yr: UNCH at 3.77%
  • 3-yr: -1 bp to 3.63%
  • 5-yr: -1 bp to 3.56%
  • 10-yr: UNCH at 3.77%
  • 30-yr: UNCH at 4.07%

• News:
  • China's government will reportedly split its planned mortgage refinancing scheme into two parts. 
  • China's President Xi spoke in favor of deepening ties with African countries.
  • Reserve Bank of Australia Governor Bullock said that it is too early to consider rate cuts, adding that tighter policy may be needed if inflation doesn't recede.
  • The Bank of England's latest Decision Maker Panel survey showed that year-ahead inflation expectations remained at 2.7% while the three-year outlook rose to 2.7% from 2.5%. Meanwhile, the British Chamber of Commerce believes that CPI will not return to target until early 2027.
  • Germany's ifo Institute lowered its domestic growth forecast for 2024 to stagnation from 0.4% while the outlook for 2025 was reduced to 0.9% from 1.5%.
  • Japan's July Wages grew 3.6% yr/yr (expected 3.0%; last 4.5%).
  • South Korea's Q2 GDP contracted 0.2% qtr/qtr, as expected (last 1.3%) but was up 2.3% yr/yr, as expected (last 3.3%).
  • Singapore's July Retail Sales rose 3.1% m/m (last -3.7%), increasing 1.0% yr/yr (last -0.6%).
  • Australia's July trade surplus reached AUD6.01 bln (expected surplus of AUD5.05 bln; last surplus of AUD5.43 bln) as imports fell 0.8% m/m (last 0.4%) and exports rose 0.7% m/m (last 1.4%).
  • Eurozone's July Retail Sales rose 0.1% m/m, as expected (last -0.4%) but were down 0.1% yr/yr (expected 0.1%; last -0.4%).
  • Germany's July Factory Orders rose 2.9% m/m (expected -1.6%; last 4.6%).
  • U.K.'s August Construction PMI hit 53.6 (expected 54.6; last 55.3).
  • Swiss August Unemployment Rate remained at 2.5%, as expected.
• Commodities:
  • WTI Crude: +0.4% to $69.44/bbl
  • Gold: +0.8% to $2545.80/ozt
  • Copper: +0.7% to $4.106/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1097
  • GBP/USD: +0.1% to 1.3160
  • USD/CNH: -0.2% to 7.0946
  • USD/JPY: -0.2% to 143.40
• Data out Today:
  • 8:15 ET: August ADP Employment Change (Briefing.com consensus 150,000; prior 122,000)
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 236,000; prior 231,000), Continuing Claims (prior 1.868 mln), revised Q2 Productivity (Briefing.com consensus 2.3%; prior 2.3%), and revised Q2 Unit Labor Costs (Briefing.com consensus 0.9%; prior 0.9%) 
  • 9:45 ET: Final August S&P Global U.S. Services PMI (prior 55.0) 
  • 10:00 ET: August ISM Non-Manufacturing (Briefing.com consensus 51.0%; prior 51.4%)
  • 10:30 ET: Weekly natural gas inventories (prior +35 bcf)
  • 11:00 ET: Weekly crude oil inventories (prior -0.85 mln)