Bond Market Update

Inching Lower Ahead of PPI

• U.S. Treasuries are on track for a slightly lower start after yesterday's retreat across the curve. Treasury futures faced some light pressure in early evening trade before spending the bulk of the night in a sideways range. The market was largely unmoved by evening news of Russian drones being shot down over Polish territory after they crossed the border with Ukraine. Earlier in the night, China reported no month-over-month inflation for August with CPI now down 0.4% year-over-year. In other news, President Trump's firing of Fed Governor Cook was blocked by a federal judge, but the case will be elevated to the Supreme Court. This week was off to a quiet start on the data front, but the PPI report for August (Briefing.com consensus 0.3%; prior 0.9%) will be released at 8:30 ET. Crude oil is seeking its third consecutive gain while the U.S. Dollar Index is little changed at 97.79.
• Yield Check:
  • 2-yr: +1 bp to 3.55%
  • 3-yr: UNCH at 3.50%
  • 5-yr: +1 bp to 3.61%
  • 10-yr: +2 bps to 4.09%
  • 30-yr: +2 bps to 4.74%

• News:
  • Bank of America Institute noted that total card spending in August was up 1.7% year-over-year.
  • The Bank of Japan is expected to hold its policy at next week's meeting, but another rate hike is likely before the end of the year.
  • Betting markets see Japan's Agriculture Minister Shinjiro Koizumi as the likely winner of next month's LDP leadership contest.
  • French President Macron named Sebastien Lecornu as new prime minister.
  • China's August CPI was unchanged m/m (expected 0.1%; last 0.4%), falling 0.4% yr/yr (expected -0.2%; last 0.0%). August PPI was down 2.9% yr/yr, as expected (last -3.6%).
  • Japan's September Reuters Tankan Index rose to 13 from 9.
  • South Korea's August Unemployment Rate rose to 2.6% from 2.5%.
  • New Zealand's July Visitor Arrivals rose 2.6% m/m (last -2.2%).
  • Italy's July Industrial Production was up 0.4% m/m (expected 0.1%; last 0.2%), rising 0.9% yr/yr (last -0.7%).
  • Spain's July Industrial Production was up 2.5% yr/yr (last 1.9%).
• Commodities:
  • WTI Crude: +0.9% to $63.21/bbl
  • Gold: +0.2% to $3689.50/ozt
  • Copper: UNCH at $4.57/lb
• Currencies:
  • EUR/USD: UNCH at 1.1706 
  • GBP/USD: +0.1% to 1.3533
  • USD/CNH: UNCH at 7.1204
  • USD/JPY: +0.1% to 147.48
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 9.2%; prior -1.2%)
  • 8:30 ET: August PPI (Briefing.com consensus 0.3%; prior 0.9%) and Core PPI (Briefing.com consensus 0.3%; prior 0.9%)
  • 10:00 ET: July Wholesale Inventories (Briefing.com consensus 0.2%; prior 0.1%)
  • 10:30 ET: Weekly crude oil inventories (prior +2.42 mln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results