Bond Market Update

Mixed Start Ahead

• U.S. Treasuries are on track for a modestly lower start in longer tenors after last week's show of relative strength while shorter tenors are ahead. Treasury futures had a sleepy start to the new week, drifting inside a sideways range with a slight downward bias that has been largely reversed over the past few hours. Overall trading volume was on the light side to begin the week due to a holiday closure in Japan. Elsewhere in Asia, China reported underwhelming growth figures for August, which invited some speculation about additional stimulus measures being implemented. On a somewhat related note, Chinese trade officials are scheduled to meet with a U.S. delegation in Spain tomorrow. Economic data flow will slow notably during the U.S. session with the economic calendar limited to the 8:30 ET release of the Empire State Manufacturing Survey (Briefing.com consensus 3.0; prior 11.9) for September. Crude oil holds a modest gain while the U.S. Dollar Index is down 0.2% at 97.40.
• Yield Check:
  • 2-yr: -1 bp to 3.55%
  • 3-yr: -1 bp to 3.52%
  • 5-yr: UNCH at 3.63%
  • 10-yr: +1 bp to 4.07%
  • 30-yr: +1 bp to 4.69%

• News:
  • China launched two investigations into U.S. trade policy ahead of tomorrow's planned meeting in Spain, according to Reuters.
  • Fitch lowered France's credit rating to A+ from AA- and revised the outlook to Stable from Negative due to high debt, a weak fiscal standing, and ongoing political uncertainty.
  • Fitch raised Portugal's rating to A from A- and revised the outlook to Stable from Positive.
  • Standard & Poor's raised Spain's rating to A+ from A with a Stable outlook.
  • European Central Bank policymaker Kazimir said that rates are in a good place and there is no need to react to "tiny deviations" from target.
  • Italy's finance ministry expects 0.6% growth in 2025, followed by 0.8% growth in 2026.
  • China's August House Prices were down 2.5% yr/yr (last -2.8%). August Retail Sales rose 3.4% yr/yr (expected 3.8%; last 3.7%), August Industrial Production was up 5.2% yr/yr (expected 5.7%; last 5.7%); rising 6.2% year-to-date (last 6.3%). August Fixed Asset Investment was up 0.5% yr/yr (expected 1.5%; last 1.6%), and August Unemployment Rate rose to 5.3% from 5.2% (expected 5.2%).
  • South Korea's August trade surplus reached $6.51 bln, as expected (last surplus of $9.08 bln) as imports fell 4.1% yr/yr (expected -4.0%; last 3.3%) and exports rose 1.2% yr/yr (expected 1.3%; last 4.3%).
  • Hong Kong's Q2 Industrial Production increased 0.8% yr/yr (last 0.7%) and Q2 PPI was up 4.0% yr/yr (last 4.8%).
  • India's August WPI Inflation was up 0.52% yr/yr (expected 0.30%; last -0.58%) and August trade deficit reached $26.49 bln (last deficit of $27.35 bln).
  • Eurozone's July trade surplus reached EUR12.4 bln (expected EUR11.7 bln; last EUR8.0 bln).
  • Germany's August WPI was down 0.6% m/m (expected 0.2%; last -0.1%) but up 0.7% yr/yr (last 0.5%).
  • Italy's July trade surplus reached EUR7.908 bln (expected surplus of EUR5.500 bln; last surplus of EUR5.384 bln.
• Commodities:
  • WTI Crude: +0.4% to $62.93/bbl
  • Gold: -0.1% to $3681.90/ozt
  • Copper: +0.3% to $4.665/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1763
  • GBP/USD: +0.4% to 1.3616
  • USD/CNH: UNCH at 7.1230
  • USD/JPY: -0.2% to 147.40
• Data out Today:
  • 8:30 ET: September Empire State Manufacturing Survey (Briefing.com consensus 3.0; prior 11.9)