Bond Market Update

Longer Tenors Lead Early Selling

• U.S. Treasuries are on track for a lower start with longer tenors set to show relative weakness in the early going. Treasury futures slumped out of the gate on Sunday evening, adding to their losses as the night went on. The market bounced briefly at the start of the European session before returning to lows. The overnight retreat took place amid some big political news in Asia and Europe. Japan's LDP leadership race produced a surprise, as Sanae Takaichi won unexpectedly. She has a conservative leaning, but she also supports loose monetary policy, which resulted in a big jump in Japan's Nikkei (+4.8%) and a 2.0% drop in the yen against the dollar. In Europe, French Prime Minister Lecornu will go down in the books as the shortest-serving prime minister after his unexpected resignation due to a broad disagreement over fiscal policy. It is not yet known if President Macron will attempt to name his sixth prime minister or dissolve the National Assembly. The U.S. session will not see the release of any data today. Crude oil is on the rise despite an output boost announcement from OPEC+ while the U.S. Dollar Index is up 0.7% at 98.44.
• Yield Check:
  • 2-yr: +2 bps to 3.59%
  • 3-yr: +2 bps to 3.61%
  • 5-yr: +2 bps to 3.73%
  • 10-yr: +3 bps to 4.15%
  • 30-yr: +4 bps to 4.75%

• News:
  • Most members of the Reserve Bank of New Zealand's shadow board support a rate cut on Tuesday night.
  • European Central Bank policymaker De Guindos said that rates are at an appropriate level, but uncertainty remains high.
  • OPEC+ announced that daily output will be increased by 137,000 barrels in November, in line with reports from last week.
  • Hong Kong's September Manufacturing PMI hit 50.4 (last 50.7).
  • India's September Services PMI hit 60.9 (expected 61.6; last 63.2).
  • Australia's September MI Inflation Gauge was up 0.4% m/m (last -0.3%).
  • New Zealand's September ANZ Commodity Price Index was down 1.1% m/m (last 0.7%).
  • Eurozone's August Retail Sales were up 0.1% m/m, as expected (last -0.4%), rising 1.0% yr/yr (last 2.1%). October Sentix Investor Confidence rose to -5.4 from -9.2 (expected -7.5).
  • U.K.'s September Construction PMI hit 46.2 (expected 46.1; last 45.5).
  • Spain's August Industrial Production was up 3.4% yr/yr (last 2.7%).
  • Swiss September Unemployment Rate rose to 3.0% from 2.9% (expected 2.9%).
• Commodities:
  • WTI Crude: +0.7% to $61.29/bbl
  • Gold: +1.3% to $3958.50/ozt
  • Copper: -1.1% to $5.054/lb
• Currencies:
  • EUR/USD: -0.5% to 1.1675
  • GBP/USD: -0.4% to 1.3426
  • USD/CNH: +0.2% to 7.1454
  • USD/JPY: +2.0% to 150.33
• No Data on Today's Schedule