Bond Market Update

Long End Paces Monday Rise

• U.S. Treasuries began the week with solid gains in longer tenors while the short end underperformed, ending slightly higher. The Monday affair was quiet as the overnight session lacked the participation of Japanese markets due to a holiday while the overall data flow was light and did not include any economic news from the U.S. The Bureau of Economic Analysis announced that the release of the advance estimate of Q3 GDP, which was originally scheduled for October 30, has been cancelled. The second estimate was scheduled to come out this Wednesday, but that release will be delayed. The long bond outperformed from the start, starting with a solid gain that was extended as the day went on, pressuring the 30-yr yield back below its 50-day moving average (4.680%) to its lowest close in more than a week while the 10-yr yield settled at a level not seen in nearly a month as expectations for a December rate cut climbed again. The 2-yr note underperformed, but still eked out a slight gain with some assistance from a solid $69 bln 2-yr note sale. Crude oil recovered the bulk of its loss from Friday while the U.S. Dollar Index spent the day near its flat line at 100.18.
• Yield Check:
  • 2-yr: UNCH at 3.51%
  • 3-yr: -1 bp to 3.49%
  • 5-yr: -1 bp to 3.60%
  • 10-yr: -3 bps to 4.04%
  • 30-yr: -4 bps to 4.68%

• News:
  • President Trump said that the had a good phone call with China's President Xi.
  • The Reserve Bank of New Zealand will meet on Wednesday and the NZIER Shadow Board supports a 25-basis point rate cut.
  • South Korea and Taiwan are reportedly making a joint push to influence the Trump administration to lower tariffs on chip imports from both nations.
  • New Bank of Japan policymaker Kazuyauki Masu spoke in favor of a rate hike but did not specify his preferred timing.
  • Singapore's October CPI was unchanged m/m (last 0.4%), rising 1.2% yr/yr (last 0.7%). October Core CPI was up 1.2% yr/yr (last 0.4%).
  • Germany's November ifo Business Climate Index fell to 88.1 from 88.4 (expected 88.6). November Current Assessment rose to 85.6 from 85.3 (expected 85.5) and Business Expectations fell to 90.6 from 91.6 (expected 91.4).
  • Swiss Q3 Employment Level remained at 5.532 mln.
• Today's Data:
  • $69 bln 2-year Treasury note auction results (prior 12-auction average):
    • High yield: 3.489% (3.929%).
    • Bid-to-cover: 2.68 (2.62).
    • Indirect bid: 58.1% (65.3%).
    • Direct bid: 30.7% (23.7%).
• Commodities:
  • WTI crude: +1.4% to $58.86/bbl
  • Gold: +0.4% to $4094.50/ozt
  • Copper: -1.0% to $4.97/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1527
  • GBP/USD: +0.1% to 1.3109
  • USD/CNH: UNCH at 7.1046
  • USD/JPY: +0.2% to 156.73
• The Day Ahead:
  • 8:30 ET: September PPI (Briefing.com consensus 0.3%; prior -0.1%), Core PPI (Briefing.com consensus 0.2%; prior -0.1%), September Retail Sales (Briefing.com consensus 0.4%; prior 0.6%), and Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.7%)
  • 9:00 ET: September FHFA Housing Price Index (Briefing.com consensus 0.3%; prior 0.4%) and September S&P Case-Shiller Home Price Index (Briefing.com consensus 1.6%; prior 1.6%)
  • 10:00 ET: November Consumer Confidence (Briefing.com consensus 93.3; prior 94.6) and October Pending Home Sales (Briefing.com consensus 0.0%; prior 0.0%)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results