Bond Market Update

Longer Tenors Ahead

• U.S. Treasuries are on track for a modestly higher start after yesterday's intraday reversal that was paced by the short end. Treasury futures climbed in early evening action, hanging onto their slim gains as the night went on. The market received a handful of noteworthy economic reports, including a rise to a four-year high in Australia's unemployment rate and a weak August GDP report from the U.K. that has increased the chances of a rate cut from the Bank of England by the end of the year. The U.S. session was slated to receive a big batch of data this morning, but most of the reports will not come out due to the ongoing government shutdown. Crude oil is recovering from yesterday's reversal while the U.S. Dollar Index is down 0.2% at 98.62.
• Yield Check:
  • 2-yr: UNCH at 3.50%
  • 3-yr: -1 bp to 3.50%
  • 5-yr: -1 bp to 3.62%
  • 10-yr: -3 bps to 4.02%
  • 30-yr: -3 bps to 4.61%

• News:
  • President Trump acknowledged that the U.S. and China are in a trade war.
  • An agreement that South Korea will invest $350 bln in the U.S. as part of the trade is reportedly close to being reached.
  • French Prime Minister Lecornu survived a no-confidence motion by a slim margin, and he is expected to face another one.
  • European Central Bank policymaker Muller said that rates are in a good place.
  • Japan's August Core Machinery Orders were down 0.9% m/m (expected 0.4%; last -4.6%) but up 1.6% yr/yr (expected 4.8%; last 4.9%). August Tertiary Industry Activity fell to -4.3 from 1.2.
  • Australia's September employment increased by 14,900 (expected 20,500; last -11,800) and full employment increased by 8,700 (last -48,600). September Unemployment Rate rose to 4.5% from 4.3% (expected 4.3%) and Participation Rate rose to 67.0% from 66.9% (expected 66.8%).
  • New Zealand's September FPI was down 0.4% m/m (last 0.3%).
  • Eurozone's August trade surplus reached EUR1.0 bln (expected surplus of EUR6.9 bln; last surplus of EUR12.7 bln).
  • U.K.'s August GDP expanded 0.1% m/m, as expected (last -0.1%), growing 1.3% yr/yr, as expected (last 1.5%). August Construction Output was down 0.3% m/m (expected -0.1%; last 0.0%) but up 1.0% yr/yr (last 1.8%). August Industrial Production rose 0.4% m/m (expected 0.2%; last 0.4%) but was down 0.7% yr/yr (expected -0.6%; last -0.1%). August Manufacturing Production rose 0.7% m/m (expected 0.2%; last -1.1%) but was down 0.8% yr/yr (expected -1.0%; last -0.1%). August trade deficit reached GBP21.18 bln (expected deficit of GBP21.80 bln; last deficit of GBP20.65 bln).
  • Italy's September CPI was down 0.2% m/m, as expected (last 0.1%) but up 1.6% yr/yr, as expected (last 1.6%). August trade surplus reached EUR2.05 bln (expected surplus of EUR8.94 bln; last surplus of EUR7.83 bln).
• Commodities:
  • WTI Crude: +0.8% to $58.76/bbl
  • Gold: +1.4% to $4260.50/ozt
  • Copper: -1.2% to $4.953/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1654
  • GBP/USD: +0.4% to 1.3441
  • USD/CNH: UNCH at 7.1274
  • USD/JPY: +0.1% to 151.24
• Data out Today:
  • 8:30 ET: September PPI (DELAYED; Briefing.com consensus 0.3%; prior -0.1%), Core PPI (DELAYED; Briefing.com consensus 0.2%; prior -0.1%), September Retail Sales (DELAYED; Briefing.com consensus 0.4%; prior 0.6%), Retail Sales ex-auto (DELAYED; Briefing.com consensus 0.3%; prior 0.7%), weekly Initial Claims (DELAYED; Briefing.com consensus 227,000; prior NA), Continuing Claims (DELAYED; prior NA), and October Philadelphia Fed survey (Briefing.com consensus 9.1; prior 23.2)
  • 10:00 ET: August Business Inventories (DELAYED; Briefing.com consensus 0.1%; prior 0.2%) and October NAHB Housing Market Index (Briefing.com consensus 33; prior 32)
  • 10:30 ET: Weekly natural gas inventories (prior 80 bcf)
  • 12:00 ET: Weekly crude oil inventories (prior 3.72 mln)