Bond Market Update

Steady Start Ahead

• U.S. Treasuries are on track for a slightly lower start in shorter tenors while the long end is little changed. Treasury futures spent the night in a narrow range, seeing some light early pressure that was mostly reversed after the start of the European session. The light selling has been accompanied by some weakness in other sovereign debt, with notable underperformance in Australia's debt amid speculation that the country's easing cycle has concluded. On a related note, the Reserve Bank of New Zealand lowered its cash rate by 25 basis points to 2.25%, as expected, noting that it sees risks as balanced at this time. Still, the central bank left the option of another rate cut on the table for 2026. Meanwhile, press reports from Japan suggested that the Bank of Japan could announce its next rate hike at the December meeting with the market almost certain that the hike will be announced no later than the end of January. The U.S. session will feature the release of the delayed Durable Orders (Briefing.com consensus 0.3%; prior 2.9%) report for September and the U.S. Treasury will sell $44 bln in 7-yr notes this afternoon. Crude oil is little changed near $58/bbl while the U.S. Dollar Index is up 0.2% at 99.85.
• Yield Check:
  • 2-yr: +1 bp to 3.47%
  • 3-yr: +1 bp to 3.46%
  • 5-yr: UNCH at 3.57%
  • 10-yr: +1 bp to 4.01%
  • 30-yr: UNCH at 4.66%

• News:
  • The Bank of Korea will release its latest statement overnight, but the policy rate is expected to remain at 2.50%.
  • European Central Bank policymaker Vucic said that risks to growth and inflation are balanced at this time while policymaker De Guindos said that trade uncertainty has receded.
  • The International Monetary Fund voiced concern that the German economy is at risk of undershooting growth expectations without reforms.
  • Japan's October Corporate Services Price Index was up 2.7% yr/yr, as expected (last 3.1%) and September BoJ Core CPI was up 2.2% yr/yr, as expected (last 2.1%). September Leading Index rose to 108.6 from 107.0 (expected 108.0).
  • South Korea's November Business Confidence rose to 70 from 68.
  • Singapore's October Industrial Production was up 11.5% m/m (expected -3.5%; last 26.4%), jumping 29.1% yr/yr (expected 9.5%; last 16.2%).
  • Australia's Q3 Construction Work Done was down 0.7% qtr/qtr (expected 0.2%; last 2.9%). October CPI was unchanged 0.0% m/m (last 0.5%), rising 3.8% yr/yr (last 3.6%).
  • Swiss November ZEW Expectations rose to 12.2 from -7.7.
• Commodities:
  • WTI Crude: -0.2% to $57.82/bbl
  • Gold: +0.5% to $4158.90/ozt
  • Copper: +1.8% to $5.09/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1576
  • GBP/USD: +0.1% to 1.3174
  • USD/CNH: UNCH at 7.0781
  • USD/JPY: +0.3% to 156.53
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 0.2%; prior -5.2%)
  • 8:30 ET: September Durable Orders (Briefing.com consensus 0.3%; prior 2.9%), Durable Orders ex-transport (Briefing.com consensus 0.2%; prior 0.4%), weekly Initial Claims (Briefing.com consensus 225,000; prior 220,000), and Continuing Claims (prior 1.974 mln)
  • 9:45 ET: November Chicago PMI (Briefing.com consensus 44.5; prior 43.8)
  • 10:30 ET: Weekly crude oil inventories (prior -3.43 mln)
  • 12:00 ET: Weekly natural gas inventories (prior -14 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results