Bond Market Update

Shorter Tenors Find Tentative Support

• Longer-dated Treasuries are on track for a continuation of their weakness from the past two days while shorter tenors are eyeing a flat start. Treasuries spent the night in a narrow sideways range with a slight downward bias despite the release of a customary end-of-month torrent of economic data from major economies. China's Manufacturing PMI (49.0) showed a deepening contraction while China's Services PMI (50.1) pointed to another month of stagnation in the services sector. In Europe, the eurozone's CPI showed a deceleration in the yr/yr rate to 2.1% from 2.2%. The data flow will come to a near halt during the U.S. session, given the ongoing government shutdown. Crude oil holds a modest loss while the U.S. Dollar Index is up 0.1% at 99.60.
• Yield Check:
  • 2-yr: UNCH at 3.61%
  • 3-yr: UNCH at 3.61%
  • 5-yr: UNCH at 3.72%
  • 10-yr: +1 bp to 4.10%
  • 30-yr: +1 bp to 4.66%

• News:
  • Japan's Finance Minister Katayama commented on the foreign exchange market, acknowledging that recent weakness in the yen is being watched with a "high sense of urgency."
  • China has reportedly purchased more soybean shipments from the U.S.
  • People's Bank of China Governor Pan said that the short-term rate corridor will be narrowed.
  • The European Central Bank's latest Survey of Professional Forecasters showed an uptick in harmonized inflation expectations for 2025 to 2.1% from 2.0% while the GDP growth forecast was increased to 1.2% from 1.1%. The inflation forecast for 2026 remained at 1.8% while the growth forecast for next year stayed at 1.1%.
  • Several ECB policymakers spoke about policy being in a good place after yesterday's decision to hold the rate corridor unchanged.
  • China's October Manufacturing PMI hit 49.0 (expected 49.6; last 49.8) and Non-Manufacturing PMI hit 50.1, as expected (last 50.0).
  • Japan's October Tokyo CPI was up 2.8% yr/yr (last 2.5%) and Tokyo Core CPI was also up 2.8% yr/yr (expected 2.6%; last 2.5%). September Industrial Production rose 2.2% m/m (expected 1.5%; last -1.5%), September Retail Sales rose 0.5% yr/yr (expected 0.8%; last -0.9%), and September Unemployment Rate remained at 2.6% (expected 2.5%). September Housing Starts were down 7.3% yr/yr (expected -7.8%; last -9.8%) and Construction Orders jumped 34.7% yr/yr (last 38.9%).
  • South Korea's September Industrial Production was down 1.2% m/m (expected 0.1%; last 2.2%) but up 11.6% yr/yr (expected 5.9%; last 0.9%). September Retail Sales dipped 0.1% m/m (last -2.4%).
  • Hong Kong's Q3 GDP was up 0.7% qtr/qtr (last 0.4%); 3.8% yr/yr (last 3.1%). September Retail Sales rose 5.9% yr/yr (last 3.8%).
  • Singapore's September Bank Lending reached SGD863.8 bln (last SGD851.7 bln). Q3 Business Expectations rose to 8.00 from 5.00.
  • Australia's September Private Sector Credit was up 0.6% m/m, as expected (last 0.6%). Q3 PPI was up 1.0% qtr/qtr (expected 0.8%; last 0.7%), rising 3.5% yr/yr (last 3.4%).
  • Eurozone's October CPI was up 0.2% m/m (last 0.1%), rising 2.1% yr/yr, as expected (last 2.2%). October Core CPI was up 0.3% m/m (last 0.1%), rising 2.4% yr/yr (expected 2.3%; last 2.4%).
  • Germany's September Retail Sales were up 0.2% m/m, as expected (last -0.5%), rising 0.2% yr/yr (last -1.6%). September Import Price Index rose 0.2% m/m (expected -0.2%; last -0.5%) but was down 1.0% yr/yr (last -1.5%).
  • U.K.'s October Nationwide HPI was up 0.3% m/m (expected 0.0%; last 0.5%), rising 2.4% yr/yr (expected 2.3%; last 2.2%).
  • France's October CPI was up 0.1% m/m, as expected (last -1.0%), rising 1.0% yr/yr (expected 1.1%; last 1.2%). September PPI was down 0.2% m/m (last -0.2%) but up 0.1% yr/yr (last 0.1%).
  • Italy's October CPI was down 0.3% m/m (expected 0.0%; last -0.2%) but up 1.2% yr/yr (expected 1.6%; last 1.6%).
  • Spain's August Current Account surplus reached EUR5.08 bln (last surplus of EUR6.27 bln).
  • Swiss September Retail Sales rose 1.5% yr/yr (expected 0.3%; last -0.4%).
• Commodities:
  • WTI Crude: -0.3% to $60.37/bbl
  • Gold: +0.1% to $4018.60/ozt
  • Copper: +0.2% to $5.114/lb
• Currencies:
  • EUR/USD: UNCH at 1.1567
  • GBP/USD: -0.2% to 1.3128
  • USD/CNH: +0.1% to 7.1186
  • USD/JPY: UNCH at 154.10
• Data out Today:
  • 8:30 ET (DELAYED): Q3 Employment Cost Index (Briefing.com consensus 0.9%; prior 0.9%), September Personal Income (Briefing.com consensus 0.4%; prior 0.4%), Personal Spending (Briefing.com consensus 0.4%; prior 0.6%), PCE Prices (Briefing.com consensus 0.3%; prior 0.3%), and Core PCE Prices (Briefing.com consensus 0.3%; prior 0.2%)
  • 9:45 ET: October Chicago PMI (Briefing.com consensus 42.0; prior 40.6)