Bond Market Update

Inching Higher After Quiet Night

• U.S. Treasuries are on track for a slightly higher start after a quiet night in the futures market. Treasury futures spent the early part of the night in a sideways range before a brief slide to lows that took place alongside the start of the European session. However, the weakness was reversed quickly with futures inching past their overnight highs in recent trade. The overnight news flow included some indications that the Bank of Japan will not announce another rate hike until March while the expectations for a December rate cut from the Bank of England inched higher after inflation figures for October showed a deceleration in the growth of service prices. The U.S. session is expected to see an 8:30 ET release of the Trade Balance report for August, which had been delayed by the government shutdown. Later in the day, the U.S. Treasury will sell $16 bln in 20-yr bonds. Crude oil is falling back below $60/bbl after finding resistance near its 50-day moving average (61.01) while the U.S. Dollar Index is up 0.2% at 99.70.
• Yield Check:
  • 2-yr: -1 bp to 3.57%
  • 3-yr: -2 bps to 3.56%
  • 5-yr: -1 bp to 3.68%
  • 10-yr: -1 bp to 4.11%
  • 30-yr: -1 bp to 4.73%

• News:
  • Treasury Secretary Bessent said that President Trump is likely to announce the next nominee for Fed Chairman by Christmas.
  • Japan Prime Minister Takaichi's cabinet is expected to approve stimulus spending on Friday with reports suggesting that the package could exceed the previously reported amount of JPY20 trln.
  • China reinstated its ban against Japanese seafood amid growing political tension between the two nations.
  • FT reported that the British government is preparing to sell British Steel after rescuing the company from insolvency in 2019.
  • The Central Bank of Iceland lowered its policy rate by 25 basis points to 7.25%.
  • Japan's September Core Machinery Orders were up 4.2% m/m (expected 2.2%; last -0.9%), rising 11.6% yr/yr (expected 5.4%; last 1.6%).
  • Australia's October MI Leading Index was up 0.1% m/m (last 0.0%). Q3 Wage Price Index was up 0.8% qtr/qtr, as expected (last 0.8%), rising 3.4% yr/yr, as expected (last 3.4%).
  • New Zealand's Q3 Input PPI was up 0.2% qtr/qtr (expected 0.9%; last 0.6%) and Output PPI was up 0.6% qtr/qtr (expected 0.7%; last 0.6%).
  • Eurozone's October CPI was up 0.2% m/m, as expected (last 0.1%), rising 2.1% yr/yr, as expected (last 2.2%). October Core CPI was up 0.3% m/m, as expected (last 0.1%), rising 2.4% yr/yr, as expected (last 2.4%). Q3 Labor Cost Index was up 3.5% yr/yr (last 3.6%). September Current Account surplus reached EUR23.1 bln (expected surplus of EUR15.9 bln; last surplus of EUR22.2 bln).
  • U.K.'s October CPI was up 0.4% m/m, as expected (last 0.0%), rising 3.6% yr/yr (expected 3.5%; last 3.8%). October Core CPI was up 0.3% m/m (expected 0.4%; last 0.0%), rising 3.4% yr/yr, as expected (last 3.5%). October Input PPI was down 0.3% m/m (expected 0.0%; last -0.1%) but up 0.5% yr/yr (expected 0.7%; last 0.7%) and Output PPI was unchanged m/m (expected 0.1%; last 0.0%), rising 3.6% yr/yr (last 3.5%). October House Price Index was up 2.6% yr/yr (expected 3.0%; last 3.0%).
• Commodities:
  • WTI Crude: -2.5% to $59.24/bbl
  • Gold: +1.3% to $4118.50/ozt
  • Copper: +1.3% to $5.04/lb
• Currencies:
  • EUR/USD: UNCH at 1.1578
  • GBP/USD: -0.2% to 1.3117
  • USD/CNH: +0.1% to 7.1137
  • USD/JPY: +0.5% to 156.23
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -5.2%; prior 0.6%)
  • 8:30 ET: August Trade Balance (Briefing.com consensus -$54.5 bln; prior -$78.3 bln). October Housing Starts (Briefing.com consensus 1.340 mln; prior NA) and Building Permits (Briefing.com consensus 1.355 mln; prior NA)
  • 10:30 ET: Weekly crude oil inventories (prior 6.41 mln)
  • 14:00 ET: October FOMC Minutes
• Treasury Auctions:
  • 13:00 ET: $16 bln 20-yr Treasury bond auction results