Bond Market Update

Dipping Ahead of September CPI

• U.S. Treasuries are on track for a modestly lower start in most tenors, but some early volatility is likely to follow the 8:30 ET release of the delayed September CPI (Briefing.com consensus 0.4%; prior 0.4%) and Core CPI (Briefing.com consensus 0.3%; prior 0.3%). Treasury futures spent the bulk of the night in a sideways range, briefly rising to highs at the start of the European session before reversing to fresh lows. The market received a sizable batch of global economic data, including contractionary flash October Manufacturing PMI readings from Japan and Australia while readings from major European economies were better than expected with the eurozone's reading hitting 50.0, which represents a standstill in activity. Crude oil is building on this week's bounce off its lowest level since early May while the U.S. Dollar Index is up 0.1% at 99.04.
• Yield Check:
  • 2-yr: +2 bps to 3.50%
  • 3-yr: +2 bps to 3.51%
  • 5-yr: +2 bps to 3.62%
  • 10-yr: +2 bps to 4.01%
  • 30-yr: +2 bps to 4.59%

• News:
  • President Trump will meet with China's President Xi on October 30, right before the November 1 deadline for increased tariffs on imports from China.
  • President Trump said that trade talks with Canada have been terminated.
  • China replaced 11 Central Committee members with new officials who are seen as loyal to President Xi.
  • China approved its next five-year plan, focusing on technology breakthroughs and revitalizing consumption.
  • Japan's top trade union will seek a 5% wage hike in the spring.
  • France's Socialist party has threatened to file a no-confidence motion against the prime minster if their demand for higher taxes on wealthy individuals is not met.
  • Japan's September National CPI was up 0.1% m/m (last 0.1%), rising 2.9% yr/yr (last 2.7%). September National Core CPI was up 2.9% yr/yr, as expected (last 2.7%). Flash October Manufacturing PMI hit 48.3 (expected 48.8; last 48.5) and flash Services PMI hit 52.4 (last 53.3). August Leading Index was up 0.9% m/m (expected 1.3%; last 1.1%) and Coincident Indicator was down 1.3% m/m (expected -0.7%; last -1.8%).
  • India's flash October Manufacturing PMI hit 58.4 (last 57.7) and flash Services PMI hit 58.8 (last 60.9).
  • Australia's flash October Manufacturing PMI hit 49.7 (last 51.4) and October Services PMI hit 53.1 (last 52.4).
  • Singapore's Q3 URA Property Index was up 0.9% qtr/qtr (expected 1.2%; last 1.0%).
  • Eurozone's flash October Manufacturing PMI hit 50.0 (expected 49.8; last 49.8) and flash Services PMI hit 52.6 (expected 51.2; last 51.3).
  • Germany's flash October Manufacturing PMI hit 49.6 (expected 49.8; last 49.5) and flash Services PMI hit 54.5 (expected 51.1; last 51.5).
  • U.K.'s September Retail Sales were up 0.5% m/m (expected -0.2%; last 0.6%), rising 1.5% yr/yr (expected 0.6%; last 0.7%). September Core Retail Sales were up 0.6% m/m (last 1.0%), rising 2.3% yr/yr (expected 0.7%; last 1.3%). Flash October Manufacturing PMI hit 49.6 (expected 46.6; last 46.2) and flash Services PMI hit 51.1 (expected 51.0; last 50.8).
  • France's October Consumer Confidence rose to 90 from 88 (expected 87). Flash October Manufacturing PMI hit 48.3 (expected 48.2; last 48.2) and flash Services PMI hit 47.1 (expected 48.7; last 48.5).
  • Spain's Q3 Unemployment Rate rose to 10.45% from 10.29% (expected 10.20%) and September PPI was up 0.3% yr/yr (last -1.6%).
• Commodities:
  • WTI Crude: +0.8% to $62.27/bbl
  • Gold: -1.7% to $4075.30/ozt
  • Copper: -0.2% to $5.10/lb
• Currencies: 
  • EUR/USD: UNCH at 1.1612
  • GBP/USD: -0.1% to 1.3305
  • USD/CNH: +0.1% to 7.1257
  • USD/JPY: +0.3% to 152.95
• Data out Today:
  • 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)