Bond Market Update

Safe-Haven Bid

• US Treasuries found a bid in the overnight trade, as trade tension between the US and China was stoked by China's move to sanction five US subsidiaries of South Korean shipping company Hanwha Ocean. The 10-yr note yield fell to 4.00% before running into some resistance; however, yields remain lower across the curve with safe-haven support playing a part. U.S. equity futures signal weakness at today's open in spite of a round of mostly better-than-expected earnings results from several of the nation's largest financial institutions. Participants are also waiting on a 12:20 p.m. ET speech this afternoon from Fed Chair Powell on the economic outlook and monetary policy. It is always noteworthy when the Fed chair is speaking about the economy and policy, but even more so today given the lack of data ahead of the October FOMC meeting due to the government shutdown, which is now in day 14.
• Yield check:
  • 2-yr: -3 bps to 3.49%
  • 3-yr: -4 bps to 3.49%
  • 5-yr: -4 bps to 3.61%
  • 10-yr: -2 bps to 4.03%
  • 30-yr: -1 bp to 4.62%

• News:
  • China announced new sanctions on five U.S. subsidiaries of South Korean shipping company Hanwha Ocean
  • China has started collecting additional port fees for U.S. cargo ships and said it will be investigating the impact of the U.S. probe into China's shipping and shipbuilding industries, according to CNBC
  • Both China and the U.S. are trying to de-escalate tensions. The Trump administration is privately pressuring China while considering a variety of options to retaliate (FXI). WSJ
  • President Trump’s 10-50% tariffs on home furnishings, furniture, and lumber officially go into effect
  • EU trade chief Maros Sefcovic says China's export controls are a critical issue for EU; tensions are increasing between EU and China. WSJ
  • Treasury Secretary Scott Bessent says President Trump is still on track to meet with Chinese President Xi in late October. Reuters
  • South Korean Finance Minister Koo Yun-cheol says "huge progress" is being made in trade talks with US. Reuters
  • Western companies warn that China/U.S. rare earth dispute will impact supply chains, according to FT
  • France's President Macron said he is not resigning
  • September NFIB Small Business Optimism Index 98.8 (prior 100.8)
  • Eurozone's October ZEW Economic Sentiment 22.7 (prior 30.2; prior 26.1)
  • U.K.'s September Claimant Count Change 25.8K (expected 10.3K; prior -2.0K); unemployment rate 4.8% (expected 4.7%; prior 4.7%); and August average earnings index + bonus 5.0% (expected 4.7%; prior 4.8%)
• Commodities:
  • WTI crude: -2.2% to $58.18/bbl
  • Gold: +0.5% to $4155.10/ozt
  • Copper: -2.8% to $5.00/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1555
  • GBP/USD: -0.5% to 1.3268
  • USD/CNH: +0.1% to 7.1474
  • USD/JPY: -0.2% to 152.08
• The Day Ahead:
  • 08:45 ET: Fed Governor Bowman (FOMC voter) discussion at Institute of International Finance
  • 12:20 ET: Fed Chair Powell (FOMC voter) speech on Economic Outlook and Monetary Policy at NABE meeting
  • 15:25 ET: Fed Governor Waller (FOMC voter) speech on payments at Institute of International Finance
  • 15:30 ET: Boston Fed President Collins (FOMC voter)
  • There is no U.S. economic data of note today due to government shutdown