Bond Market Update

Trimming Midweek Losses

• U.S. Treasuries are on track for a modestly higher start after yesterday's retreat that lifted yields to multi-week highs. Treasury futures saw limited movement in early evening action, followed by a slow rise to highs during the latter portion of the overnight session. Equity markets in Asia bounced from yesterday's weakness while European indices have faced some more pressure today. The Bank of England kept its bank rate at 4.00%, but four out of nine policymakers voted for a cut, suggesting a rate cut could be announced in December. Also in Europe, Maersk CEO said that demand for goods in the U.S. strengthened in recent weeks and it expects continued strength over the next six months. Investors were scheduled to receive a decent batch of economic data today, including Q3 Productivity and Unit Labor Costs, but today's economic docket is being delayed by the ongoing government shutdown. Crude oil is on the rise while the U.S. Dollar Index is down 0.3% at 99.88.
• Yield Check:
  • 2-yr: -3 bps to 3.60%
  • 3-yr: -3 bps to 3.62%
  • 5-yr: -4 bps to 3.73%
  • 10-yr: -3 bps to 4.13%
  • 30-yr: -1 bp to 4.73%

• News:
  • Japan's Prime Minister Takaichi will reportedly seek a JPY10 trln extra budget, about 40% lower than what had been expected.
  • Japan's federation of Textile, Chemical, Commerce, Food, and General Services workers will seek a 6% wage hike in the spring.
  • China has reportedly purchased 120 kt of U.S. wheat for December delivery.
  • China's Ministry of Finance priced $4 bln in dollar-denominated debt.
  • Germany's Bundesbank released its latest financial stability report, expressing concern over significantly elevated equity and bond valuations.
  • Japan's October Services PMI hit 53.1 (expected 52.4; last 53.3). September overall wage income was up 1.9% yr/yr, as expected (last 1.3%).
  • South Korea's September Current Account surplus reached $13.47 bln (last surplus of $9.15 bln).
  • India's October Services PMI hit 54.9 (expected 58.8; last 60.9).
  • Australia's September trade surplus reached AUD3.938 bln (expected surplus of AUD3.93 bln; last surplus of AUD1.11 bln) as imports rose 1.1% m/m (last 3.3%) and exports increased 7.9% m/m (last -8.7%).
  • Eurozone's September Retail Sales dipped 0.1% m/m (expected 0.2%; last -0.1%) but were up 1.0% yr/yr, as expected (last 1.6%).
  • Germany's September Industrial Production rose 1.3% m/m (expected 3.0%; last -3.7%) but was down 1.0% yr/yr (last -3.7%).
  • France's Q3 nonfarm payrolls fell 0.3% qtr/qtr (expected -0.1%; last 0.2%).
  • Spain's Industrial Production rose 1.7% yr/yr (last 3.3%).
  • Swiss October Unemployment Rate remained at 3.0%, as expected.
• Commodities:
  • WTI Crude: +0.9% to $60.13/bbl
  • Gold: +0.7% to $4018.80/ozt
  • Copper: +0.7% to $5.02/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1533
  • GBP/USD: +0.4% to 1.3101
  • USD/CNH: -0.1% to 7.1216
  • USD/JPY: -0.3% to 153.60
• Data out Today:
  • 8:30 ET: Preliminary Q3 Productivity (DELAYED; Briefing.com consensus 2.5%; prior 3.3%), Unit Labor Costs (DELAYED; Briefing.com consensus 0.8%; prior 1.0%), weekly Initial Claims (DELAYED; Briefing.com consensus 229,000; prior NA), and Continuing Claims (DELAYED; prior NA)
  • 10:00 ET: September Wholesale Inventories (DELAYED; Briefing.com consensus -0.2%; prior NA)
  • 10:30 ET: Weekly natural gas inventories (prior +74 bcf)