Bond Market Update

Trimming Midweek Gains

• U.S. Treasuries are on track for a lower start, looking to give back a portion of their solid gains from Wednesday. Treasury futures faced some pressure during the first half of the overnight session, but they made a brief return to their flat lines once the focus shifted to action in Europe. The market remained near highs for a couple hours before sliding to fresh lows during the past three hours. The retreat has been accompanied by losses in other sovereign debt with Australia underperforming slightly after the release of a strong jobs report for October that has weighed on expectations for a rate cut from the Reserve Bank of Australia. In the U.S., the government shutdown has come to an end but economic data reporting will not resume immediately. The market was scheduled to receive the October CPI report this morning, but that report is unlikely to ever see the light of day. The U.S. Treasury will sell $25 bln in 30-yr bonds this afternoon. Crude oil is rising toward $59/bbl while the U.S. Dollar Index is down 0.2% at 99.28.
• Yield Check:
  • 2-yr: +2 bps to 3.59%
  • 3-yr: +2 bps to 3.58%
  • 5-yr: +2 bps to 3.69%
  • 10-yr: +2 bps to 4.09%
  • 30-yr: +1 bp to 4.67%

• News:
  • The International Energy Agency raised its supply and demand forecasts for 2025 and 2026.
  • Japan's Prime Minister Takaichi said that the primary balance target could be calculated over several years rather than annually, which would open the door to greater fiscal spending. She repeated that she would like to see higher tax revenues without tax hikes.
  • Germany's economy minister warned that trade dynamics are expected to weaken significantly in 2026.
  • China's October New Loans reached CNY220.0 bln (expected CNY460.0 bln; last CNY1.290 trln) and October Loans grew 6.5% yr/yr (expected 6.6%; last 6.6%). October total social financing reached CNY810.0 bln (expected CNY1.23 trln; last CNY3.53 trln).
  • Japan's October PPI was up 0.4% m/m (last 0.5%), rising 2.7% yr/yr (expected 2.5%; last 2.8%).
  • Australia's October Employment increased by 42,200 (expected 20,000; last 12,800) and full Employment increased by 55,300 (last 6,500). October Unemployment Rate fell to 4.3% from 4.5% (expected 4.4%) and October Participation Rate remained at 67.0%. October MI Inflation Expectations slowed to 4.5% from 4.8%.
  • New Zealand's October Electronic Card Retail Sales grew 0.2% m/m (last -0.5%), rising 0.8% yr/yr (last 1.0%). September Visitor Arrivals increased 2.9% m/m (last 2.4%).
  • Eurozone's September Industrial Production was up 0.2% m/m (expected 0.7%; last -1.1%), rising 1.2% yr/yr (expected 2.1%; last 1.2%).
  • U.K.'s Q3 GDP expanded 0.1% qtr/qtr (expected 0.2%; last 0.3%), growing 1.3% yr/yr, as expected (last 1.4%). Q3 Business Investment was down 0.3% qtr/qtr (expected -0.7%; last -1.1%) but up 0.7% yr/yr (last 3.0%). September Construction Output was up 0.2% m/m (expected 0.0%; last -0.5%), rising 1.3% yr/yr (expected 1.2%; last 1.1%). September Industrial Production was down 2.0% m/m (expected -0.5%; last 0.3%), falling 2.5% yr/yr (expected -1.2%; last -0.5%). September Manufacturing Production was down 1.7% m/m (expected -0.7%; last 0.6%), falling 2.2% yr/yr (expected -0.8%; last -0.7%). September trade deficit reached GBP18.88 bln (expected deficit of GBP20.80 bln; last deficit of GBP19.53 bln).
  • France's Q3 Unemployment Rate rose to 7.7% from 7.6% (expected 7.6%).
  • Swiss October PPI was down -0.3% m/m (expected -0.1%; last -0.2%), falling 1.7% yr/yr (last -1.8%).
• Commodities:
  • WTI Crude: +0.7% to $58.87/bbl
  • Gold: +0.7% to $4240.80/ozt
  • Copper: +0.4% to $5.127/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1621
  • GBP/USD: +0.3% to 1.3177
  • USD/CNH: -0.2% to 7.0947
  • USD/JPY: -0.1% to 154.62
• Data out Today:
  • 8:30 ET: October CPI (Briefing.com consensus 0.2%; prior 0.3%), Core CPI (Briefing.com consensus 0.3%; prior 0.2%), Initial Claims (prior NA), and Continuing Claims (prior NA)
  • 12:00 ET: Weekly crude oil inventories (prior +5.20 mln)
  • 14:00 ET: October Treasury Budget (Briefing.com consensus -$310.0 bln; prior $198.0 bln)
• Treasury Auctions:
  • 13:00 ET: $25 bln 30-yr Treasury bond auction results