Bond Market Update

October Rally Moderated

• U.S. Treasuries ended Thursday with losses across the curve, as the 5-yr note and longer tenors dipped from their best levels of the month while the 2-yr note deepened last week's reversal from its October high. Treasuries recorded the bulk of their losses at the open after a night that saw a generally positive showing from global equities and a sharp rally in the price of oil after the U.S. Treasury sanctioned two major Russian energy companies. Treasuries widened their starting losses in mid-morning trade alongside a strong showing from equities, remaining just above their lows into the close. The FOMC's October meeting is now just a few days away and JP Morgan expects that the central bank will announce the end of its quantitative tightening in its policy statement. Crude oil approached its 50-day moving average (62.29) while the U.S. Dollar Index rose 0.1% to 98.95.
• Yield Check:
  • 2-yr: +4 bps to 3.48%
  • 3-yr: +5 bps to 3.49%
  • 5-yr: +5 bps to 3.60%
  • 10-yr: +4 bps to 3.99%
  • 30-yr: +3 bps to 4.57%

• News:
  • President Trump will meet with Japan's Prime Minister Takaichi on Tuesday.
  • President Trump will meet with China's President Xi next Thursday.
  • The Bank of Korea left its policy rate at 2.50%, as expected. Governor Rhee said that high home prices and weak won are preventing the central bank from cutting rates.
  • China's State Council removed Wang Dongwei from the vice minister of finance post.
  • Germany's council of tax experts increased its forecast for tax revenue though 2029. Finance Minister Klingbeil said that the increased forecast reflects a more positive outlook.
  • The Swiss National Bank released the Minutes from its September meeting, showing no appetite for additional easing. 
  • Hong Kong's September CPI was up 0.1% m/m (last 0.1%), rising 1.1% yr/yr (last 1.1%).
  • Singapore's September CPI was up 0.4% m/m (last 0.5%), rising 0.7% yr/yr (expected 0.6%; last 0.5%). September Core CPI was up 0.4% yr/yr (expected 0.2%; last 0.3%).
  • Australia's Q3 NAB Quarterly Business Confidence rose to 2 from 0.
  • U.K.'s October CBI Industrial Trends Orders fell to -38 from -27 (expected -28).
  • France's October Business Survey rose to 101 from 97 (expected 96).
  • Spain's August trade deficit reached EUR6.00 bln (last deficit of EUR4.01 bln).
• Today's Data:
  • Existing home sales increased 1.5% month-over-month in September to a seasonally adjusted annual rate of 4.06 million (Briefing.com consensus 4.05 million) from an unrevised 4.00 million in August. Sales were up 4.1% on a year-over-year basis.
    • The key takeaway from the report is that home sales in September were aided by falling mortgage rates, which eased (but did not negate) affordability constraints for some home buyers.
  • Weekly natural gas inventories increased by 87 bcf after increasing by 80 bcf a week ago.
• Commodities:
  • WTI crude: +5.6% to $61.78/bbl
  • Gold: +2.0% to $4146.50/ozt
  • Copper: +2.4% to $5.11/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1618
  • GBP/USD: -0.2% to 1.3324
  • USD/CNH: UNCH at 7.1240
  • USD/JPY: +0.4% to 152.52
• The Day Ahead:
  • 8:30 ET: September CPI (Briefing.com consensus 0.4%; prior 0.4%) and Core CPI (Briefing.com consensus 0.3%; prior 0.3%)
  • 9:45 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)
  • 10:00 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)