Bond Market Update

Long End Leads

• U.S. Treasuries are on track for a higher start with longer tenors expected to show early strength after dipping on Thursday. Treasury futures spent the early portion of the night in a sideways range, rising to highs as volume shifted from Asia to Europe. The advance in Treasuries has taken place alongside gains in other sovereign debt. Expectations for a snap election in France have receded, as President Macron will attempt to name his sixth prime minister over the past two years. The overnight data flow was on the light side and things will remain pretty quiet during the U.S. session, with the market scheduled to receive the Preliminary reading of the October University of Michigan Consumer Sentiment (Briefing.com consensus 54.5; prior 55.1) at 10:00 ET. The market was also scheduled to receive the September Treasury Budget (Briefing.com consensus -$83.0 bln; prior -$344.8 bln) at 14:00 ET, but that release will likely be delayed. On a side note, the Bureau of Labor Statistics is preparing to release the September CPI report on Wednesday even if the government shutdown continues into next week. Crude oil is falling back below $61/bbl while the U.S. Dollar Index is down 0.2% at 99.35.
• Yield Check:
  • 2-yr: -3 bps to 3.57%
  • 3-yr: -3 bps to 3.59%
  • 5-yr: -4 bps to 3.70%
  • 10-yr: -5 bps to 4.10%
  • 30-yr: -5 bps to 4.68%

• News:
  • Fed Governor Waller said during a CNBC interview that he believes rates should be cut, but the Fed needs to be careful about it.
  • Japan's incoming Prime Minister Takaichi said that there is no immediate need to revise the government's accord with the Bank of Japan, adding that she is not in position to comment on rate hike speculation.
  • Reserve Bank of Australia Governor Bullock said that the Australian economy is in a good spot, though services inflation remains sticky.
  • The U.K.'s National Institute of Economic and Social Research believes that Chancellor Reeves should break her promise to not raise taxes in the Autumn budget.
  • Japan's September PPI was up 0.3% m/m (expected 0.1%; last -0.2%), rising 2.7% yr/yr (expected 2.5%; last 2.7%). September Bank Lending was up 3.8% yr/yr (expected 3.7%; last 3.5%).
  • New Zealand's September Business PMI hit 49.9 (last 49.9).
  • Italy's August Industrial Production fell 2.4% m/m (expected -0.3%; last 0.4%), dropping 2.7% yr/yr (expected 0.5%; last 0.9%).
  • Swiss September SECO Consumer Climate rose to -37 from -40 (expected -38).
• Commodities:
  • WTI Crude: -1.2% to $60.78/bbl
  • Gold: +0.9% to $4008.60/ozt
  • Copper: UNCH at $5.12/lb
• Currencies:
  • EUR/USD: UNCH at 1.1567
  • GBP/USD: -0.2% to 1.3275
  • USD/CNH: -0.2% to 7.1258
  • USD/JPY: -0.3% to 152.58
• Data out Today:
  • 10:00 ET: Preliminary October University of Michigan Consumer Sentiment (Briefing.com consensus 54.5; prior 55.1)
  • 14:00 ET *Likely delayed*: September Treasury Budget (Briefing.com consensus -$83.0 bln; prior -$344.8 bln)