Bond Market Update

Long Bond Leads on Quiet Monday

• U.S. Treasuries had a quiet start to the new week with slight relative strength in the long bond pressuring the 30-yr yield past last week's low to a level last seen in early April while the 2-yr note underperformed, ending little changed. The Monday affair was largely uneventful with longer tenors showing slight strength from the start and maintaining their lead into the close. The Secured Overnight Financing Rate reversed its increase from the past two sessions, which was a welcome development at a time when the market has suddenly turned its attention to concerns about liquidity. There were also some positive signals from overseas with China beating Q3 GDP growth expectations (1.1%; expected 0.8%) and Japan coming close to confirming its new prime minister. On a side note, President Trump said that he will travel to China early next year. Crude oil remained near $57/bbl while the U.S. Dollar Index rose 0.2% to 98.59.
• Yield Check:
  • 2-yr: UNCH at 3.46%
  • 3-yr: UNCH at 3.47%
  • 5-yr: -1 bp to 3.58%
  • 10-yr: -2 bps to 3.99%
  • 30-yr: -3 bps to 4.58%

• News:
  • Japan's LDP and Innovation Party agreed to form a coalition government, putting Sanae Takaichi on track to be officially elected new prime minister tomorrow.
  • The People's Bank of China made no changes to its one-year and five-year loan prime rates.
  • Australia's Prime Minister Albanese will meet with President Trump today.
  • Standard & Poor's lowered France's credit rating to A+ from AA- due to persistent fiscal risks.
  • Bundesbank President Nagel said that the EU needs to be more forceful with China to protect its own interests.
  • China's Q3 GDP expanded 1.1% qtr/qtr (expected 0.8%; last 1.0%), growing 4.8% yr/yr (expected 4.7%; last 5.2%). September Fixed Asset Investment was down 0.5% yr/yr (expected 0.1%; last 0.5%), September Industrial Production was up 6.5% yr/yr (expected 5.0%; last 5.2%), September Retail Sales rose 3.0% (expected 2.9%; last 3.4%), and September Unemployment Rate dipped to 5.2% from 5.3% (expected 5.3%).
  • Hong Kong's September Unemployment Rate rose to 3.9% from 3.7%.
  • New Zealand's Q3 CPI was up 1.0% qtr/qtr (expected 0.8%; last 0.5%), rising 3.0% yr/yr, as expected (last 2.7%).
  • Eurozone's August Current Account reached EUR11.9 bln (expected surplus of EUR22.5 bln; last surplus of EUR27.7 bln). August Construction Output was down 0.1% m/m (last 0.5%).
  • Germany's September PPI was down 0.1% m/m (expected 0.1%; last -0.5%), falling 1.7% yr/yr (last -2.2%).
• Commodities:
  • WTI crude: -0.1% to $57.03/bbl
  • Gold: +3.5% to $4359.10/ozt
  • Copper: +1.2% to $5.03/lb
• Currencies:
  • EUR/USD: UNCH at 1.1647
  • GBP/USD: -0.1% to 1.3410
  • USD/CNH: UNCH at 7.1236
  • USD/JPY: UNCH at 150.64
• No Data on Tomorrow's Schedule