Bond Market Update

Quiet Start to November

• U.S. Treasuries started November on a flat note, spending the day in a sideways range near their opening levels. The trading day started with modest gains that were paced by shorter tenors after a night that saw gains in most global equity markets and some weakness in sovereign debt. Final October Manufacturing PMI readings from major economies showed a return to contraction in South Korea's reading (49.4) while China's RatingDog Manufacturing PMI (50.6) reflected a deceleration in the pace of growth. Eurozone's Manufacturing PMI hit 50.0, reflecting no month-over-month change in activity. Treasuries climbed to highs in morning trade, but they quickly found resistance, pulling back from highs even though the ISM Manufacturing Index for October (48.7%; Briefing.com consensus 49.4%) showed a deepening contraction in activity. The U.S. Treasury announced this afternoon that borrowing in Q4 is expected to reach $569 bln, $21 bln below the prior estimate, while borrowing in Q1 is expected to reach $578 bln. Crude oil inched higher while the U.S. Dollar Index rose 0.1% to 99.87.
• Yield Check:
  • 2-yr: -1 bp to 3.60%
  • 3-yr: UNCH at 3.61%
  • 5-yr: UNCH at 3.72%
  • 10-yr: +1 bp to 4.11%
  • 30-yr: +2 bps to 4.69%

• News:
  • The Reserve Bank of Australia will release its latest policy Statement tomorrow, but a rate change is not expected.
  • The European Central Bank's survey of monetary analysts showed expectations for no change in rates until early 2028, followed by rate hikes.
  • The French government is still struggling to reach a budget agreement.
  • OPEC+ agreed to increase its output by 137,000 barrels per day in December, followed by a pause in Q1.
  • China's October RatingDog Manufacturing PMI hit 50.6 (expected 50.7; last 51.2).
  • South Korea's October trade surplus reached $6.06 bln (expected surplus of $2.98 bln; last surplus of $9.53 bln) as imports fell 1.5% yr/yr (expected -1.4%; last 8.2%) and exports rose 3.6% yr/yr (last 12.6%). October Manufacturing PMI hit 49.4 (last 50.7).
  • India's October Manufacturing PMI hit 59.2 (last 58.4).
  • Australia's October Manufacturing PMI hit 49.7 (last 49.7) and October MI Inflation Gauge was up 0.3% m/m (last 0.4%). September Building Approvals rose 12.0% m/m (expected 5.1%; last -3.6%), rising 12.4% yr/yr (last -0.7%). Private House Approvals were up 4.0% m/m (last -1.0%). October Commodity Prices fell 1.3% yr/yr (last 0.1%).
  • New Zealand's September Building Consents rose 7.2% m/m (last 6.1%).
  • Eurozone's October Manufacturing PMI hit 50.0, as expected (last 50.0).
  • Germany's October Manufacturing PMI hit 49.6, as expected (last 49.6).
  • U.K.'s October Manufacturing PMI hit 49.7 (expected 49.6; last 49.7).
  • France's October Manufacturing PMI hit 48.8 (expected 48.3; last 48.8).
  • Italy's October Manufacturing PMI hit 49.9 (expected 49.3; last 49.0).
  • Spain's October Manufacturing PMI hit 52.1 (expected 51.8; last 51.5).
  • Swiss October CPI was down 0.3% m/m (expected -0.1%; last -0.2%) but up 0.1% yr/yr (expected 0.3%; last 0.2%). October Manufacturing PMI hit 48.2 (expected 49.3; last 49.0).
• Today's Data:
  • The October ISM Manufacturing Index checked in at 48.7% for October (Briefing.com consensus: 49.4%), down from 49.1% in September. The dividing line between expansion and contraction is 50.0%, so the October figure, which is the eighth straight month below 50.0%, suggests manufacturing activity contracted at a faster pace than the prior month.
    • The key takeaway from the report is that the manufacturing sector saw its eighth consecutive month of contraction, with uncertainty about tariffs and the global economy tempering demand.
  • The S&P Global U.S. Manufacturing PMI hit 52.5 in the final reading for October, up from 52.2 in the preliminary reading and 52.0 in September.
• Commodities:
  • WTI crude: +0.1% to $61.00/bbl
  • Gold: +0.4% to $4013.60/ozt
  • Copper: -0.6% to $5.06/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1522
  • GBP/USD: -0.1% to 1.3139
  • USD/CNH: +0.1% to 7.1261
  • USD/JPY: +0.2% to 154.19
• The Day Ahead:
  • 8:30 ET: September Trade Balance (DELAYED; prior NA)
  • 10:00 ET: September Factory Orders (DELAYED; prior NA) and September Job Openings (DELAYED; prior 7.227 mln)