Bond Market Update

Short End Slightly Ahead

• U.S. Treasuries are on track a mixed, but largely flat start with slight relative strength up front and a softer start in longer tenors. Treasury futures spent the early portion of the night in a sideways range, seeing a short-lived dip right after the U.S. government shut down at midnight. However, that dip was reversed quickly, lifting shorter tenors to fresh highs while the long bond is just a couple ticks below its high from last evening. Overnight action saw the release of final Manufacturing PMI readings for September with Japan's Manufacturing PMI (48.5) staying in contraction while South Korea's reading (50.7) returned to expansion. Eurozone's Manufacturing PMI (49.8) returned to contraction in September. The U.S. session will also feature the final Manufacturing PMI reading for September, which will be preceded by the 8:15 ET release of the ADP Employment Change report for September (Briefing.com consensus 40,000; prior 54,000). This report might receive increased attention since the Bureau of Labor Statistics will not release the monthly Employment Situation report on Friday if the government remains closed. Crude oil is on track for its third consecutive loss while the U.S. Dollar Index is down 0.1% at 97.69.
• Yield Check:
  • 2-yr: -1 bp to 3.59%
  • 3-yr: -1 bp to 3.60%
  • 5-yr: -1 bp to 3.72%
  • 10-yr: -1 bp to 4.14%
  • 30-yr: UNCH at 4.73%

• News:
  • The White House is no longer nominating E.J. Antoni to lead the Bureau of Labor Statistics.
  • The Bank of Japan will reduce its bond purchases in Q4 by about 11%.
  • The Reserve Bank of India left its policy rate at 4.00% against expectations for a 25-basis point cut.
  • Taiwan rejected the request for even split of chip production in Taiwan and the U.S.
  • The European Commission is planning to increase tariffs on steel imports to about 50%.
  • European Central Bank policymaker De Guindos said that fiscal policy could result in higher yields in the EU.
  • Bank of England policymaker Mann said that keeping rates unchanged is the appropriate move, claiming that current policy is relatively loose.
  • Japan's Q3 Tankan All Big Industry Capex was up 12.5% (last 11.5%). Q3 Big Manufacturers Outlook Index remained at 12 (expected 13) and Q3 Large Non-Manufacturers Index remained at 34 (expected 33). September Manufacturing PMI hit 48.5 (expected 48.4; last 49.7).
  • South Korea's September trade surplus reached $9.56 bln (expected surplus of $7.81 bln; last surplus of $6.51 bln) as imports grew 8.2% yr/yr (expected 5.6%; last -4.1%) and exports rose 12.7% yr/yr (expected 7.2%; last 1.2%). September Manufacturing PMI hit 50.7 (last 48.3).
  • Singapore's Q3 URA Property Index was up 1.2% qtr/qtr (last 1.0%).
  • India's September Manufacturing PMI hit 57.7 (expected 58.5; last 59.3).
  • Australia's September Manufacturing PMI hit 51.4 (expected 51.6; last 51.6). September AIG Construction Index rose to 12.3 from 1.0 and AIG Manufacturing Index rose to -13.2 from -20.9.
  • New Zealand's August Building Consents increased 5.8% m/m (last 5.3%).
  • Eurozone's September Manufacturing PMI hit 49.8 (expected 49.5; last 50.7). Flash September CPI was up 0.1% m/m (last 0.1%), rising 2.2% yr/yr, as expected (last 2.2%). Flash Core CPI was up 0.1% m/m (last 0.3%), rising 2.3% yr/yr, as expected (last 2.3%).
  • Germany's September Manufacturing PMI hit 49.5 (expected 48.5; last 49.8).
  • U.K.'s September Nationwide HPI was up 0.5% m/m (expected 0.2%; last -0.1%), rising 2.2% yr/yr (expected 1.8%; last 2.1%). September Manufacturing PMI hit 46.2, as expected (last 46.2).
  • France's September Manufacturing PMI hit 48.2 (expected 48.1; last 50.4).
  • Italy's September Manufacturing PMI hit 49.0 (expected 49.9; last 50.4).
  • Spain's September Manufacturing PMI hit 51.5 (expected 53.8; last 54.3).
  • Swiss August Retail Sales fell 0.2% yr/yr (expected 0.5%; last 0.9%) and September Manufacturing PMI hit 46.3 (expected 47.9; last 49.0).
• Commodities:
  • WTI Crude: -0.4% to $62.11/bbl
  • Gold: +0.9% to $3909.70/ozt
  • Copper: +0.1% to $4.862/lb
• Currencies:
  • EUR/USD: UNCH at 1.1734
  • GBP/USD: +0.3% to 1.3483
  • USD/CNH: UNCH at 7.1272
  • USD/JPY: -0.6% to 147.00
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -12.7%; prior 0.6%)
  • 8:15 ET: September ADP Employment Change (Briefing.com consensus 40,000; prior 54,000)
  • 9:45 ET: Final September S&P Global U.S. Manufacturing PMI (prior 52.0)
  • 10:00 ET: August Construction Spending (Briefing.com consensus 0.1%; prior -0.1%) and September ISM Manufacturing (Briefing.com consensus 49.2%; prior 48.7%)
  • 10:30 ET: Weekly crude oil inventories (prior -0.607 mln)