Bond Market Update

Dipping Ahead of FOMC

• U.S. Treasuries are on track for a modestly lower start with shorter tenors expected to show some relative weakness after another quiet night in the futures market. Treasury futures spent the bulk of the night in a sideways range, slipping to lows once the focus shifted to action in Europe. The light selling comes ahead of today's FOMC widely expected rate cut announcement and a possible end to the Fed's quantitative tightening program. The overnight news flow featured continued focus on President Trump's Asia tour, as he arrived in South Korea for the APEC Summit, where he is expected to meet with China's President Xi tomorrow. Crude oil is rising off a one-week low while the U.S. Dollar Index is up 0.2% at 98.85.
• Yield Check:
  • 2-yr: +1 bp to 3.50%
  • 3-yr: +1 bp to 3.51%
  • 5-yr: +1 bp to 3.62%
  • 10-yr: +1 bp to 3.99%
  • 30-yr: +1 bp to 4.56%

• News:
  • A major food distributor in China has reportedly purchased a considerable amount of U.S. soybeans ahead of the meeting of the two leaders.
  • The Wall Street Journal reported that the U.S. is likely to reduce the fentanyl-related tariff on imports from China.
  • Expectations for a rate cut from the Reserve Bank of Australia collapsed after the release of hotter-than-expected CPI for Q3.
  • Japan's October Household Confidence rose to 35.8 from 35.3 (expected 35.5).
  • Australia's Q3 CPI was up 1.3% qtr/qtr (expected 1.1%; last 0.7%), rising 3.2% yr/yr (expected 3.0%; last 2.1%). Q3 Trimmed Mean CPI was up 1.0% qtr/qtr (expected 0.8%; last 0.6%), rising 3.0% yr/yr (expected 2.7%; last 2.7%). Monthly CPI Indicator was up 3.5% yr/yr (expected 3.1%; last 3.0%).
  • U.K.'s September BoE Consumer Credit reached GBP1.491 bln (last GBP1.749 bln). September Mortgage Approvals reached 65,940 (expected 64,000; last 64,960) and September net Lending to Individuals hit GBP7.00 bln (expected GBP5.60 bln; last GBP6.00 bln).
  • Italy's September non-EU trade surplus reached EUR2.47 bln (last surplus of EUR1.88 bln).
  • Spain's Q3 GDP expanded 0.6% qtr/qtr, as expected (last 0.8%), growing 2.8% yr/yr (expected 3.0%; last 3.1%). September Retail Sales rose 4.2% yr/yr (last 4.7%).
  • Swiss October ZEW Expectations rose to -7.7 from -46.4.
• Commodities:
  • WTI Crude: +0.4% to $60.39/bbl
  • Gold: +1.2% to $4032.40/ozt
  • Copper: +0.7% to $5.208/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1640
  • GBP/USD: -0.4% to 1.3221
  • USD/CNH: +0.1% to 7.0979
  • USD/JPY: +0.1% to 152.19
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 7.1%; prior -0.3%)
  • 8:30 ET: September advance International Trade in Goods (prior -$85.5 bln), advance Retail Inventories (prior 0.0%), and advance Wholesale Inventories (prior -0.2%)
  • 10:00 ET: September Pending Home Sales (Briefing.com consensus 1.2%; prior 4.0%)
  • 10:30 ET: Weekly crude oil inventories (prior -0.961 mln)
  • 14:00 ET: October FOMC Decision (Briefing.com consensus 3.75-4.00%; prior 4.00-4.25%)