Bond Market Update

Longer Tenors Overcome Early Softness

• U.S. Treasuries finished Thursday with modest gains, pressuring yields on 5s, 10s, and 30s to their lowest closing levels in two weeks. Treasuries faced some pressure during the opening hour of today's session, which lacked the customary release of the weekly Initial Claims report. Investors received the September Challenger Job Cuts report (-25.8% yr/yr; prior +13.3% yr/yr) earlier in the morning, which is not known for getting a reaction from the market, but given the current lack of official employment data, the report likely received some attention, contributing to the early dip. However, the early pressure was short lived, as Treasuries started rising off their lows about 30 minutes after the open. The bounce was led by the long bond, which outperformed from the start and remained slightly ahead into the close. The intraday bounce in Treasuries took place alongside another resilient showing from equities, while commodities were generally lower with gold futures reversing from a record high while silver backed down from its highest level since May 2011. Crude oil fell for the fourth day in a row, reaching its lowest level since late May, while the U.S. Dollar Index climbed 0.2% to 97.86.
• Yield Check:
  • 2-yr: +1 bp to 3.55%
  • 3-yr: UNCH at 3.56%
  • 5-yr: -1 bp to 3.67%
  • 10-yr: -2 bps to 4.09%
  • 30-yr: -2 bps to 4.70%

• News:
  • Senate Majority Leader Thune said that it is unlikely for the Senate to have enough votes over the weekend to reopen the government, meaning the shutdown is on course to continue into next week.
  • Treasury Secretary Bessent told CNBC that he expects a "pretty big breakthrough" in talks with China that will take place later this month.
  • Shipper Maersk said that China's container shipments to Latin America, Africa, and Europe increased markedly while shipments to North America are down about 15% yr/yr.
  • Japan's Agriculture Minister Shinjiro Koizumi is reportedly a slight favorite to win Saturday's LDP leadership vote.
  • British food retailer Tesco increased its guidance while discount air carrier Ryanair reported strong metrics for September.
  • The British government may exempt new listings on the London Stock Exchange from paying stamp duty amid growing concerns about falling competitiveness of British markets.
  • There was some speculation that the Swiss National Bank could cut its policy rate into negative territory after cool September CPI.
  • Japan's September Monetary Base was down 6.1% yr/yr (expected -3.8%; last -4.1%). September Household Confidence rose to 35.3 from 34.9 (expected 35.1).
  • South Korea's September CPI was up 0.5% m/m (expected 0.4%; last -0.1%), rising 2.1% yr/yr (expected 2.0%; last 1.7%).
  • Hong Kong's August Retail Sales rose 3.8% yr/yr (last 1.8%). 
  • Australia's August trade surplus reached AUD1.825 bln (expected surplus of AUD6.130 bln; last surplus of AUD6.612 bln).
  • Eurozone's August Unemployment Rate rose to 6.3% from 6.2% (expected 6.2%).
  • France's August government budget deficit reached EUR157.5 bln (last deficit of EUR142.0 bln).
  • Italy's August Unemployment Rate rose to 6.0% from 5.9%, as expected.
  • Spain's September unemployment decreased by 4,800 (expected +15,400; last +21,900)
  • Swiss September CPI was down 0.2% m/m, as expected (last -0.1%) and up 0.2% yr/yr (expected 0.3%; last 0.2%).
• Today's Data:
  • Weekly natural gas inventories increased by 53 bcf after increasing by 75 bcf a week ago.
• Commodities:
  • WTI crude: -2.1% to $60.48/bbl
  • Gold: -0.8% to $3868.50/ozt
  • Copper: +1.4% to $4.95/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1725
  • GBP/USD: -0.2% to 1.3449
  • USD/CNH: +0.1% to 7.1308 
  • USD/JPY: +0.1% to 147.16
• The Day Ahead:
  • 9:45 ET: Final September S&P Global U.S. Services PMI (prior 53.9)
  • 10:00 ET: September ISM Services (Briefing.com consensus 51.7%; prior 52.0%)