Bond Market Update

Rising Ahead of FOMC Meeting

• U.S. Treasuries began the week with gains across the cure, lifting the long bond toward last week's high ahead of tomorrow's start of a two-day FOMC meeting that is expected to conclude with a 25-basis point rate cut on Wednesday. The trading day started in flat fashion after a night that saw the release of weak August growth figures from China that fueled speculation about more stimulus from Chinese authorities. Treasuries climbed through the initial 90 minutes of action with some assistance from an Empire State Manufacturing survey for September (-8.7; Briefing.com consensus 3.0; prior 11.9), which showed an unexpected contraction in activity. The 10-yr note and shorter tenors remained near their morning highs into the close while the long bond hit a fresh high at noon, stopping just shy of its best level from Thursday. Crude oil climbed back above $63/bbl while the U.S. Dollar Index fell 0.3% to 97.31.
• Yield Check:
  • 2-yr: -3 bps to 3.53%
  • 3-yr: -3 bps to 3.50%
  • 5-yr: -2 bps to 3.60%
  • 10-yr: -3 bps to 4.03%
  • 30-yr: -2 bps to 4.66%

• News:
  • Chinese trade officials are scheduled to meet with a U.S. delegation in Spain tomorrow.
  • 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 credit rating to A from A- and revised the outlook to Stable from Positive.
  • Standard & Poor's raised Spain's credit 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.
• Today's Data:
  • The Empire State Manufacturing survey fell to -8.7 in September (Briefing.com consensus 3.0) from 11.9 in August.
• Commodities:
  • WTI crude: +1.0% to $63.31/bbl
  • Gold: +0.9% to $3719.10/ozt
  • Copper: +1.5% to $4.72/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1769
  • GBP/USD: +0.4% to 1.3605
  • USD/CNH: -0.1% to 7.1187
  • USD/JPY: -0.2% to 147.32
• The Day Ahead:
  • 8:30 ET: August Retail Sales (Briefing.com consensus 0.3%; prior 0.5%), Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.3%), August Import Prices (prior 0.4%), Import Prices ex-oil (prior 0.3%), Export Prices (prior 0.1%), and Export Prices ex-agriculture (prior 0.1%
  • 9:15 ET: August Industrial Production (Briefing.com consensus 0.0%; prior -0.1%) and Capacity Utilization (Briefing.com consensus 77.4%; prior 77.5%)
  • 10:00 ET: July Business Inventories (Briefing.com consensus 0.2%; prior 0.0%) and September NAHB Housing Market Index (Briefing.com consensus 33; prior 32)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results