Bond Market Update

Steady Finish to Quiet Week

• U.S. Treasuries ended a quiet week in subdued fashion with the 10-yr note and shorter tenors adding to this week's gains while the long bond underperformed, adding to this week's loss. The trading day started with modest gains up front after a night that saw the release of smaller-than-expected trade surpluses from top exporters China and Germany. China saw below-consensus growth in imports (+1.0% yr/yr; expected +3.2%) and an unexpected drop in exports (-1.1% yr/yr; expected +3.0%) while Germany imported more goods than expected (+3.1% m/m; expected 0.5%). The U.S. session was supposed to feature the release of the Employment Situation report for October, but the ongoing government shutdown stopped the report from being released. The Senate is expected to hold another vote on a continuing resolution today with another vote planned for the weekend if today's attempt fails to reach the required 60 vote threshold. Treasuries followed their slightly higher start with some early backtracking, but they bounced shortly after turning negative, rising past their opening levels amid a weak showing from equities. Treasuries reached their best levels around 11:00 ET, followed by some late selling that returned yields toward their starting levels, lifting them above their respective 50-day moving averages. Crude oil narrowed this week's loss to 2.0%, or $1.22, while the U.S. Dollar Index slipped 0.1% to 99.60, shedding 0.1% for the week.
• Yield Check:
  • 2-yr: -1 bp to 3.56% (-5 bps this week)
  • 3-yr: -1 bp to 3.57% (-4 bps this week)
  • 5-yr: -1 bp to 3.68% (-4 bps this week)
  • 10-yr: UNCH at 4.09% (-1 bp this week)
  • 30-yr: +1 bp to 4.70% (+3 bps this week)

• News:
  • Japan's Financial Services Agency will support joint issuance of a stablecoin by three major banks.
  • The Dutch government will give up control of Chinese chipmaker Nexperia if China restarts exports of some chips, according to Bloomberg.
  • China's October trade surplus reached $90.07 bln (expected surplus of $96.90 bln; last surplus of $90.45 bln) as imports rose 1.0% yr/yr (expected 3.2%; last 7.4%) and exports fell 1.1% yr/yr (expected 3.0%: last 8.3%). October Foreign Reserves reached $3.343 trln (expected $3.320 trln; last $3.339 trln).
  • Japan's September Household Spending was down 0.7% m/m (last 0.6%) but up 1.8% yr/yr (expected 2.5%; last 2.3%).
  • Germany's September trade surplus reached EUR15.3 bln (expected surplus of EUR16.7 bln; last surplus of EUR16.9 bln) as imports rose 3.1% m/m (expected 0.5%; last -1.4%) and exports grew 1.4% m/m (expected 0.5%; last -0.8%).
  • U.K.'s October Halifax House Price Index was up 0.6% m/m (expected 0.1%; last -0.3%), rising 1.9% yr/yr (expected 1.5%: last 1.3%).
  • France's September trade deficit reached EUR6.6 bln (expected deficit of EUR5.9 bln; last deficit of EUR5.2 bln). September Current Account deficit reached EUR1.60 bln (last surplus of EUR1.40 bln).
  • Swiss Q4 SECO Consumer Climate fell to -37 from -28 (expected -36).
• Today's Data:
  • The preliminary University of Michigan Consumer Sentiment reading for November fell to 50.3 (Briefing.com consensus: 54.0) from the final reading of 53.6 for October. In the same period a year ago, the index stood at 71.8.
    • The key takeaway from the report is that the decline in sentiment was widespread across the population, with one notable exception: consumers within the largest tercile of stock holdings.
  • Consumer credit increased by $13.1 billion in September (Briefing.com consensus: $8.0 billion) following an upwardly revised $3.1 billion increase (from $0.4 billion) in August.
    • The key takeaway from the report is that the expansion in consumer credit in September was driven largely by nonrevolving credit.
• Commodities:
  • WTI crude: +0.5% to $59.73/bbl
  • Gold: +0.5% to $4010.00/ozt
  • Copper: -0.2% to $4.96/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1561
  • GBP/USD: +0.2% to 1.3160
  • USD/CNH: +0.1% to 7.1258 
  • USD/JPY: +0.3% to 153.46
• The Week Ahead:
  • Monday: $58 bln 3-yr Treasury note auction results at 13:00 ET
  • Tuesday: *Bond market closed for Veterans Day* October NFIB Small Business Optimism (Briefing.com consensus 98.3; prior 98.8) at 6:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -1.9%) at 7:00 ET and $42 bln 10-yr Treasury note auction results at 13:00 ET
  • Thursday: October CPI (Briefing.com consensus 0.2%; prior 0.3%), Core CPI (Briefing.com consensus 0.3%; prior 0.2%), Initial Claims (prior NA), and Continuing Claims (prior NA) at 8:30 ET; weekly crude oil inventories (prior +5.20 mln) at 12:00 ET; $25 bln 30-yr Treasury bond auction results at 13:00 ET; and October Treasury Budget (Briefing.com consensus -$310.0 bln; prior $198.0 bln) at 14:00 ET
  • Friday: October PPI (Briefing.com consensus 0.4%; prior NA), Core PPI (Briefing.com consensus 0.3%; prior NA), October Retail Sales (Briefing.com consensus 0.3%; prior NA), and Retail Sales ex-auto (Briefing.com consensus 0.3%; prior NA) at 8:30 ET; September Business Inventories (Briefing.com consensus 0.1%; prior NA) at 10:00 ET; and weekly natural gas inventories (prior +33 bcf)