Bond Market Update

Steady Finish to October

• U.S. Treasuries had a quiet finish to October with yields finishing the month at levels last seen three weeks ago. The Friday session was uneventful, as Treasuries navigated a narrow sideways range near their starting levels. The long bond underperformed a bit, recording a modest loss, while shorter tenors finished the day unchanged. The limited action kept the 10-yr yield right on its 50-day moving average (4.101%), which also marks a three-week high, while the 2-yr yield finished the month just shy of a five-week high. This week's retreat, which followed a hawkish hike from Fed returned the 5-yr note and shorter tenors to little changed for the month while 10s and 30s recorded slim gains. The market received a full slate of economic data from around the globe today, but the overall reaction was muted. Crude oil climbed toward $61/bbl, narrowing its October loss to $1.42, or 2.3%, while the U.S. Dollar Index rose 0.3% to its highest level since August, gaining 2.1% for the month.
• Yield Check:
  • 2-yr: UNCH at 3.61% (+13 bps this week; +1 bp in October)
  • 3-yr: UNCH at 3.61% (+12 bps this week; UNCH in October)
  • 5-yr: UNCH at 3.72% (+12 bps this week; -1 bp in October)
  • 10-yr: +1 bp to 4.10% (+10 bps this week; -5 bps in October)
  • 30-yr: +2 bps to 4.67% (+8 bps this week; -6 bps in October)

• 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%).
• Today's Data:
  • The Chicago PMI hit 43.8 in October (Briefing.com consensus 42.0), up from 40.6 in September.
• Commodities:
  • WTI crude: +0.6% to $60.95/bbl
  • Gold: -0.5% to $3996.00/ozt
  • Copper: -0.2% to $5.09/lb
• Currencies:
  • EUR/USD: -0.4% to 1.1526
  • GBP/USD: -0.1% to 1.3140
  • USD/CNH: +0.2% to 7.1234
  • USD/JPY: UNCH at 154.09
• The Week Ahead:
  • Monday: Final October S&P Global U.S. Manufacturing PMI (prior 52.0) at 9:45 ET; September Construction Spending (DELAYED; prior NA) and October ISM Manufacturing Index (Briefing.com consensus 49.4%; prior 49.1%) at 10:00 ET
  • Tuesday: September Trade Balance (DELAYED; prior NA) at 8:30 ET; September Factory Orders (DELAYED; prior NA) and September Job Openings (DELAYED; prior 7.227 mln) at 10:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior 7.1%) at 7:00 ET; October ADP Employment Change (Briefing.com consensus 26,000; prior -32,000) at 8:15 ET; Final October S&P Global U.S. Services PMI (prior 54.2) at 9:45 ET; October ISM Services (Briefing.com consensus 50.9%; prior 50.0%) at 10:00 ET; and weekly crude oil inventories (prior -6.86 mln) at 10:30 ET
  • Thursday: Preliminary Q3 Productivity (Briefing.com consensus 2.5%; prior 3.3%), Unit Labor Costs (Briefing.com consensus 0.8%; prior 1.0%), weekly Initial Claims (DELAYED; Briefing.com consensus 229,000; prior NA), and Continuing Claims (DELAYED; prior NA) at 8:30 ET; September Wholesale Inventories (DELAYED; Briefing.com consensus -0.2%; prior NA) at 10:00 ET; and weekly natural gas inventories (prior +74 bcf) at 10:30 ET
  • Friday: October Nonfarm Payrolls (DELAYED; prior NA), Nonfarm Private Payrolls (DELAYED; prior NA), Unemployment Rate (DELAYED; prior NA), Average Hourly Earnings (DELAYED; prior NA), and Average Workweek (DELAYED; prior NA) at 8:30 ET; preliminary November University of Michigan Consumer Sentiment (Briefing.com consensus 54.0; prior 53.6) at 10:00 ET; and September Consumer Credit (DELAYED; Briefing.com consensus $8.0 bln; prior NA) at 15:00 ET