Bond Market Update

Long End Ahead

• U.S. Treasuries are on track for a higher start with longer tenors set to pace the early strength. Treasury futures spent the early part of the evening in a sideways range, followed by a rise to highs during the latter portion of the night. The advance has taken place alongside gains in other sovereign debt while equity markets have been mixed with Asia seeing some profit taking while European equities are on the rise. The Reserve Bank of New Zealand announced a bigger-than-expected rate cut that brought New Zealand's Official Cash Rate to 2.50%, below the previously anticipated terminal rate of 2.55%. The U.S. session will not see any top tier data but the U.S. Treasury will hold a $39 bln 10-yr note reopening this afternoon. Crude oil is seeking to extend its bounce while the U.S. Dollar Index is up 0.3% at 98.85.
• Yield Check:
  • 2-yr: -1 bp to 3.56%
  • 3-yr: UNCH at 3.58%
  • 5-yr: -2 bps to 3.69%
  • 10-yr: -3 bps to 4.10%
  • 30-yr: -4 bps to 4.69%

• News: 
  • Reports related to Golden Week activity in China suggest that a lot of travel took place, but spending was restrained.
  • There is a growing concern that France will miss its deadline for submitting a 2026 budget due to the ongoing political paralysis.
  • European Central Bank policymakers Nagel, Rehn, and Escriva spoke about inflation being essentially on target at this time.
  • Japan's October Reuters Tankan Index fell to 8 from 13. August Overall Wage Income was up 1.5% yr/yr (expected 2.6%; last 3.4%). August Current Account surplus reached JPY2.46 trln (expected surplus of JPY2.45 trln; last surplus of JPY1.88 trln). September Economy Watcher Current Index rose to 47.1 from 46.7 (expected 47.0).
  • Australia's August Building Approvals were down 6.0% m/m, as expected (last -8.2%) and Private House Approvals fell 2.6% m/m, as expected (last 1.1%).
  • Germany's August Industrial Production was down 4.3% m/m (expected -1.0%; last 1.3%), falling 4.2% yr/yr (last 1.5%).
• Commodities:
  • WTI Crude: +1.4% to $62.58/bbl
  • Gold: +1.3% to $4057.50/ozt
  • Copper: +0.6% to $5.128/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1629
  • GBP/USD: -0.1% to 1.3407
  • USD/CNH: +0.1% to 7.1505
  • USD/JPY: +0.6% to 152.71
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -4.7%; prior -12.7%)
  • 10:30 ET: Weekly crude oil inventories (prior +1.79 bln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results