Bond Market Update

Pulling Back

• U.S. Treasuries are on track for a lower start after yesterday's slight advance. Treasury futures began inching lower last evening, continuing their retreat until about an hour ago. The selling has taken place at a slow pace with other sovereign debt also seeing some light pressure. The night brought a heavy dose of flash PMI readings for August with Japan seeing its second consecutive month of contracting activity in the manufacturing sector while activity in India and Australia accelerated. Readings from Europe were mostly ahead of expectations with reports from Germany and France essentially showing a standstill in both sectors. The Manufacturing PMI reading for the eurozone (50.5) came in above 50.0, indicating the first expansion in activity in over three years. The U.S. session will also include PMI readings, preceded by weekly Initial Claims (Briefing.com consensus 222,000; prior 221,000) at 8:30 ET. Crude oil is extending yesterday's rebound while the U.S. Dollar Index is up 0.1% at 98.35.
• Yield Check:
  • 2-yr: +2 bps to 3.76%
  • 3-yr: +2 bps to 3.72%
  • 5-yr: +2 bps to 3.83%
  • 10-yr: +2 bps to 4.32%
  • 30-yr: +3 bps to 4.93%

• News:
  • China is considering using yuan-backed stablecoins for settling cross-border trade.
  • South Korea's exports through the first 20 days of August were up 7.6% yr/yr with chip exports jumping 29.5%.
  • Japan's August flash Manufacturing PMI hit 49.9 (expected 49.2; last 48.9) and August flash Services PMI hit 52.7 (last 53.6).
  • South Korea's July PPI was up 0.4% m/m (last 0.1%), rising 0.5% yr/yr (last 0.5%).
  • India's August flash Manufacturing PMI hit 59.8 (expected 59.1; last 59.1) and flash Services PMI hit 65.6 (expected 60.3; last 60.5).
  • Hong Kong's July CPI was up 0.6% m/m (last 0.0%), rising 1.0% yr/yr (expected 0.8%; last 1.4%).
  • Australia's August flash Manufacturing PMI hit 52.9 (last 51.3) and August flash Services PMI hit 55.1 (last 54.1). MI Inflation Expectations slowed to 3.9% from 4.7%.
  • New Zealand's July trade deficit reached NZD578 mln (expected surplus of NZD70 mln; last surplus of NZD203 mln). July Credit Card Spending was up 1.4% yr/yr (last 0.9%).
  • Eurozone's August flash Manufacturing PMI hit 50.5 (expected 49.5; last 49.8) and flash Services PMI hit 50.7 (expected 50.8; last 51.0).
  • Germany's August flash Manufacturing PMI hit 49.9 (expected 48.8; last 49.1) and flash Services PMI hit 50.1 (expected 50.4; last 50.6).
  • U.K.'s June Public Sector Net Borrowing reached GBP1.05 bln (expected GBP2.10 bln; last GBP22.56 bln). August flash Manufacturing PMI hit 47.3 (expected 48.2; last 48.0) and flash Services PMI hit 53.6 (expected 51.8; last 51.8). August CBI Industrial Trends Orders fell to -33 from -30 (expected -28).
  • France's August flash Manufacturing PMI hit 49.9 (expected 48.2; last 48.2) and flash Services PMI hit 49.7 (expected 48.5; last 48.5).
  • Swiss July trade surplus reached CHF4.59 bln (expected surplus of CHF5.15 bln; last surplus of CHF5.73 bln).
• Commodities:
  • WTI Crude: +0.6% to $63.10/bbl
  • Gold: -0.4% to $3376.70/ozt
  • Copper: -0.5% to $4.418/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1640
  • GBP/USD: UNCH at 1.3452
  • USD/CNH: UNCH at 7.1807
  • USD/JPY: +0.4% to 147.91
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 222,000; prior 221,000), Continuing Claims (prior 1.956 mln), and August Philadelphia Fed Survey (Briefing.com consensus 9.0; prior 15.9)
  • 9:45 ET: Flash S&P Global U.S. Manufacturing PMI (prior 49.8) and flash S&P Global U.S. Services PMI (prior 55.7)
  • 10:00 ET: July Leading Indicators (Briefing.com consensus -0.1%; prior -0.3%) and July Existing Home Sales (Briefing.com consensus 3.92 mln; prior 3.93 mln)
  • 10:30 ET: Weekly natural gas inventories (prior +56 bcf)