Bond Market Update

Dipping After Strong Week

• U.S. Treasuries are on track for a modestly lower start, looking to pull back after this week's rally sent yields on longer tenors to fresh lows for the week. Treasury futures spent the night in a narrow range with some downward pressure that produced lows shortly after the start of the European session. Asian equity markets displayed strength with Japan's Nikkei (+0.9%) and South Korea's Kospi (+1.5%) hitting fresh records amid a light flow of data, which included a rebound in China's total social financing for August. Economic data during the U.S. session will be limited to the 10:00 ET release of the preliminary University of Michigan Consumer Sentiment Index for September (Briefing.com consensus 59.2; prior 58.2). Crude oil is looking to recover some of yesterday's loss while the U.S. Dollar Index is up 0.1% at 97.66.
• Yield Check:
  • 2-yr: +3 bps to 3.56%
  • 3-yr: +3 bps to 3.52%
  • 5-yr: +4 bps to 3.62%
  • 10-yr: +4 bps to 4.05%
  • 30-yr: +2 bps to 4.67%

• News:
  • The U.S. and Japan reaffirmed their commitment to allowing the market to determine exchange rates.
  • The Chinese government will assist local governments with more than $1 trillion in bills.
  • Securities Times expects the People's Bank of China to resume buying bonds in Q4.
  • European Central Bank policymaker Patsalides cautioned that the next policy change could be a rate hike, and that there is no current need for action unless there is a shock, while other ECB policymakers hinted at the potential for another cut by the end of the year.
  • China's August New Loans reached CNY590.0 bln (expected CNY700.0 bln; last -CNY50.0 bln), August Outstanding Loans grew 6.8% yr/yr (expected 6.9%; last 6.9%), and August total social financing reached CNY2.57 trln (expected CNY2.46 trln; last CNY1.13 trln).
  • Japan's July Industrial Production was down 1.2% m/m (expected -1.6%; last 2.1%) and Capacity Utilization was down 1.1% m/m (last -1.8%).
  • India's August CPI was up 2.07% yr/yr (expected 2.10%; last 1.61%).
  • New Zealand's August Business PMI hit 49.9 (last 52.8). August Electronic Card Retail Sales rose 0.7% m/m (last 0.2%), increasing 0.9% yr/yr (last 1.7%).
  • Germany's August CPI was up 0.1% m/m, as expected (last 0.3%), rising 2.2% yr/yr, as expected (last 2.0%).
  • U.K.'s July GDP was unchanged m/m, as expected (last 0.4%), rising 1.4% yr/yr (expected 1.5%; last 1.4%). July Construction Output was up 0.2% m/m (expected -0.2%; last 0.3%), rising 2.4% yr/yr (expected 1.9%; last 1.5%). July Industrial Production was down 0.9% m/m (expected 0.0%; last 0.7%), rising 0.1% yr/yr (expected 1.1%; last 0.2%). July Manufacturing Production was down 1.3% m/m (expected 0.1%; last 0.5%), rising 0.2% yr/yr (expected 1.6%; last 0.0%). July trade deficit reached GBP22.24 bln (expected deficit of GBP21.60 bln; last deficit of GBP22.16 bln).
  • France's August CPI was up 0.4% m/m, as expected (last 0.2%), rising 0.9% yr/yr, as expected (last 1.0%).
  • Italy's Q2 Unemployment Rate rose to 6.3% from 6.1% (expected 6.1%).
  • Spain's August CPI was unchanged m/m, as expected (last -0.1%), rising 2.7% yr/yr, as expected (last 2.7%). August Core CPI was up 2.4% yr/yr, as expected (last 2.3%).
• Commodities:
  • WTI Crude: +1.6% to $63.34/bbl
  • Gold: +0.3% to $3685.70/ozt
  • Copper: +0.5% to $4.681/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1722
  • GBP/USD: -0.2% to 1.3549
  • USD/CNH: +0.1% to 7.1243
  • USD/JPY: +0.5% to 147.82
• Data out Today:
  • 10:00 ET: Preliminary September University of Michigan Consumer Sentiment (Briefing.com consensus 59.2; prior 58.2)