Bond Market Update

Treasuries Slip From Multi-Month Highs

• U.S. Treasuries finished the week on a lower note, lifting yields on longer tenors off their lowest levels since April while the 2-yr yield climbed off its lowest level in over three years. The trading day started with modest losses after overnight action featured some selling in global equities and continued focus on U.S. regional banks. The market received solid quarterly results from names like Comerica (CMA), Fifth Third (FITB), Regions Financial (RF), State Street (STT), and Truist (TFC), which was encouraging, but the Secured Overnight Financing Rate remained 19 basis points above the effective fed funds rate. This spread, which is traditionally in the single digits, is now about twice as big as it was on Tuesday, contributing to ongoing worries about banks scrambling for liquidity. Intraday action was largely uneventful, thanks in part to ongoing delays to economic reporting due to the government shutdown. Treasuries added to their starting losses during the first two hours of trade with shorter tenors remaining near their lows into the close while the long bond revisited its starting level, but also finished in the red. Crude oil stayed above $71/bbl, but still lost nearly $2/bbl for the week, while the U.S. Dollar Index rose 0.1% to 98.42, trimming this week's loss to 0.4%.
• Yield Check:
  • 2-yr: +3 bps to 3.46% (-6 bps this week)
  • 3-yr: +4 bps to 3.47% (-6 bps this week)
  • 5-yr: +4 bps to 3.59% (-6 bps this week)
  • 10-yr: +3 bps to 4.01% (-4 bps this week)
  • 30-yr: +2 bps to 4.60% (-3 bps this week)

• News:
  • Japan's largest political parties agreed to hold a vote for prime minister on October 21.
  • China's Ministry of Commerce said that all license applications for civilian uses of rare earth elements will be approved and that there is no export ban in place.
  • European Central Bank policymaker Scicluna said that there is no rush to make another rate cut.
  • South Korea's September Import Price Index was up 0.6% yr/yr (last -2.2%) and Export Price Index was up 2.2% yr/yr (last -1.1%). September Unemployment Rate fell to 2.5% from 2.6%.
  • Singapore's September trade surplus reached SGD5.948 bln (last surplus of SGD4.99 bln).
  • Eurozone's September CPI was up 0.1% m/m, as expected (last 0.3%), rising 2.2% yr/yr, as expected (last 2.0%). September Core CPI was up 0.1% m/m, as expected (last 0.3%), rising 2.4% yr/yr (expected 2.3%; last 2.3%).
• Commodities:
  • WTI crude: +0.1% to $57.11/bbl
  • Gold: -2.2% to $4212.70/ozt
  • Copper: -0.6% to $4.97/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1669
  • GBP/USD: UNCH at 1.3433
  • USD/CNH: +0.1% to 7.1259
  • USD/JPY: +0.1% to 150.48
• The Week Ahead:
  • Monday: September Leading Indicators (Briefing.com consensus -0.2%; prior -0.5%) at 10:00 ET
  • Tuesday: Nothing of note
  • Wednesday: Weekly MBA Mortgage Index (prior -1.8%) at 7:00 ET; weekly crude oil inventories (prior +3.52 mln) at 10:30 ET; and $13 bln 20-yr Treasury bond reopening results at 13:00 ET
  • Thursday: Weekly Initial Claims (Briefing.com consensus 223,000; prior NA) and Continuing Claims (prior NA) at 8:30 ET; September Existing Home Sales (Briefing.com consensus 4.05 mln; prior 4.00 mln) at 10:00 ET; and weekly natural gas inventories (prior +80 bcf) at 10:30 ET
  • Friday: September CPI (Briefing.com consensus 0.4%; prior 0.4%) and Core CPI (Briefing.com consensus 0.3%; prior 0.3%) at 8:30 ET; Flash October S&P Global U.S. Manufacturing PMI (prior 52.0) and flash October S&P Global U.S. Services PMI (prior 54.2) at 9:45 ET; September New Home Sales (Briefing.com consensus 710,000; prior 800,000) and final October University of Michigan Consumer Sentiment (Briefing.com consensus 55.0; prior 55.0) at 10:00 ET