Bond Market Update

Front End Leads

• U.S. Treasuries had a sound bid in the overnight trade, as foreign equity markets were digesting concerns about AI investment, overall valuations, and weaker growth that contributed to a risk-off tone. Similar concerns showed up in the futures trade for the major U.S. indices, which started the day on a weak note. They managed to pare their losses amid some buy-the-dip interest, which took a little steam out of Treasuries. Still, the Treasury market traded firmly with a bull steepener trade in play, having digested several economic releases today that included the initial jobless claims report for the week ending October 18. Wednesday's trade will feature the August Trade Balance report and the FOMC Minutes for the October 28-29 meeting. The U.S. Dollar Index was flat today at 99.54.
• Yield Check:
  • 2-yr: -3 bps to 3.58%
  • 3-yr: -3 bps to 3.58%
  • 5-yr: -3 bps to 3.69%
  • 10-yr: -1 bp to 4.12%
  • 30-yr: unch at 4.74%

• News:
  • President Trump at press conference asked about Fed Chair; says he thinks he already made his choice; says he would like to appoint Treasury Secretary Scott Bessent, "but he refused"; says he would love to get Jerome Powell out right now
  • Saudi Arabia's Mohammed bin Salman says his country will increase investment in U.S. to $1 trillion from $600 billion; Secretary of State Marco Rubio says working on sales of advanced chips to Saudi Arabia; says Saudi Arabia should get "top of the line" F-35 jets
  • President Trump says "The only healthcare I will support or approve is sending the money directly back to the people, with nothing going to the big, fat, rich insurance companies, who have made trillions, and ripped off America long enough"
  • Fed Governor Barr (FOMC voter) says, "There are growing pressures to weaken supervision—to scale back examiner coverage, to dilute ratings systems, and to redefine 'unsafe and unsound'—in ways that will make it harder for examiners to act before it is too late to prevent a build-up of excessive risk. These pressures present real dangers to the American people."
  • The lawyer for Fed Governor Lisa Cook provided a defense of her mortgage applications. WSJ
  • Senator Bill Cassidy (R-LA) proposed a new healthcare plan that has President Trump's support. His plan redirects Affordable Care Act subsidies from health insurance companies to consumers. It is unclear if the plan has enough support to pass. Politico
  • Home Depot misses by $0.10, reports revs in-line; guides FY26 EPS below consensus, revs below consensus
  • The UK's Prudential Regulation Authority is raising the cap on bank deposit insurance from GPB85K to GBP120K starting in December
  • Japan's finance minister expressed "deep concern" about FX moves
  • Japanese government bonds are falling ahead of Japanese Prime Minister Sanae Takaichi's fiscal package. Bloomberg
  • JGB yields continued to rise, with the 20-yr note yield (2.81%) hitting its highest level since 1999
• Today's Data:
  • Initial Jobless Claims for week ending Oct 18 were 232K (prior revised to 219K from 218K); Continuing Jobless CLaims for week ending Oct 11 were 1947K (prior revised to 1916K from 1926K)
  • ADP says, "For the four weeks ending Nov. 1, 2025, private employers shed an average of 2,500 jobs a week as employment losses slowed heading into November"
  • November NAHB Housing Market Index (Actual 38; Briefing.com consensus: 36; prior 37)
  • Factory orders increased 1.4% month-over-month in August (Briefing.com consensus: 0.8%) following a 1.3% decline in July. Excluding transportation, factory orders increased 0.1% month-over-month following a 0.5% increase in July. Shipments of manufactured goods slipped 0.1% on the heels of a 0.9% increase in July.
    • The key takeaway from the report is that business spending remained on an upswing, evidenced by back-to-back increases in new orders for nondefense capital goods, excluding aircraft, in July and August.
• Commodities:
  • WTI crude: +1.3% to $60.68/bbl
  • Gold: -0.6% to $4,064.50/ozt
  • Copper: -0.6% to $4.98/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1585
  • GBP/USD: flat at 1.3154
  • USD/CNH: flat at 7.1084
  • USD/JPY: +0.2% to 155.52
• The Day Ahead:
  • 07:00 ET: MBA Mortgage Applications Index (prior 0.6%)
  • 08:30 ET: August Trade Balance (Briefing.com consensus: -$61.0B; prior -$60.2B)
  • 10:30 ET: EIA Crude Oil Inventories (prior +6.41M)
  • 14:00 ET: FOMC Minutes for October 28-29 meeting