Bond Market Update
Updated: 10-Sep-25 15:10 ET
Treasury Market Summary
Cool PPI Fuels Intraday Bounce
- U.S. Treasuries climbed on Wednesday after overcoming some early softness with help from a deflationary reading of August PPI (-0.1%; Briefing.com consensus 0.3%) and Core PPI (-0.1%; Briefing.com consensus 0.3%). Treasuries followed yesterday's dip with a modestly lower start, but they bounced in immediate reaction to the unexpected deflation in August producer prices and a downward revision (to 0.7% from 0.9%) to July's hot reading. The report, which showed that producers could not pass price hikes onto consumers in August, helped return longer tenors to their highs from Monday while a strong $39 bln 10-yr note reopening lifted 10s and 30s to fresh highs for the week ahead of tomorrow's release of August CPI (Briefing.com consensus 0.3%; prior 0.2%) and Core CPI (Briefing.com consensus 0.3%; prior 0.3%). The U.S. Treasury will cap this week's strong note and bond auction slate with a sale of $22 bln in 30-yr bonds. Crude oil climbed for the third consecutive day while the U.S. Dollar Index slipped 0.1% to 97.73.
- Yield Check:
- 2-yr: -3 bps to 3.53%
- 3-yr: -3 bps to 3.49%
- 5-yr: -2 bps to 3.58%
- 10-yr: -4 bps to 4.03%
- 30-yr: -4 bps to 4.68%
- News:
- The Atlanta Fed's GDPNow forecast for Q3 GDP was raised to 3.1% from 3.0% in the latest estimate.
- 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%).
- Today's Data:
- The index for final demand decreased 0.1% month-over-month in August (Briefing.com consensus: 0.3%) following a downwardly revised 0.7% increase (from 0.9%) in July. Excluding food and energy, the index for final demand was also down 0.1% month-over-month (Briefing.com consensus: 0.3%) following a downwardly revised 0.7% increase (from 0.9%) in July. On a year-over-year basis, the index for final demand was up 2.6%, versus 3.1% in July, while the index for final demand, excluding food and energy, was up 2.8%, versus 3.4% in July.
- The key takeaway from the report is that it will ease the market's angst about pass-through effects for consumers, especially with the index for final demand services sliding 0.2% month-over-month. The added takeaway is that this report will keep the market locked on its view that there will be at least 75 basis points of rate cuts by the Fed before the end of the year.
- Wholesale Inventories increased by 0.1% in July (Briefing.com consensus 0.2%) after increasing by 0.2% in June.
- The weekly MBA Mortgage Index was up 9.2% after falling 1.2% a week ago. The Refinance Index jumped 12.2% while the Purchase Index was up 6.6%.
- Weekly crude oil inventories increased by 3.94 mln barrels after increasing by 2.42 mln barrels a week ago.
- $39 bln 10-year Treasury note reopening results (prior 12-auction average):
- High yield: 4.033% (4.302%).
- Bid-to-cover: 2.65 (2.55).
- Indirect bid: 83.1% (69.5%).
- Direct bid: 12.7% (17.8%).
- The index for final demand decreased 0.1% month-over-month in August (Briefing.com consensus: 0.3%) following a downwardly revised 0.7% increase (from 0.9%) in July. Excluding food and energy, the index for final demand was also down 0.1% month-over-month (Briefing.com consensus: 0.3%) following a downwardly revised 0.7% increase (from 0.9%) in July. On a year-over-year basis, the index for final demand was up 2.6%, versus 3.1% in July, while the index for final demand, excluding food and energy, was up 2.8%, versus 3.4% in July.
- Commodities:
- WTI crude: +1.7% to $63.67/bbl
- Gold: UNCH at $3681.90/ozt
- Copper: +1.1% to $4.62/lb
- Currencies:
- EUR/USD: -0.1% to 1.1702
- GBP/USD: +0.1% to 1.3535
- USD/CNH: UNCH at 7.1199
- USD/JPY: UNCH at 147.33
- The Day Ahead:
- 8:30 ET: August CPI (Briefing.com consensus 0.3%; prior 0.2%) and Core CPI (Briefing.com consensus 0.3%; prior 0.3%), weekly Initial Claims (Briefing.com consensus 240,000; prior 237,000), and Continuing Claims (prior 1.940 mln)
- 10:30 ET: Weekly natural gas inventories (prior +55 bcf)
- 14:00 ET: August Treasury Budget (prior -$291.1 bln)
- Treasury Auctions:
- 13:00 ET: $22 bln 30-yr Treasury bond reopening result
