Bond Market Update

Long End Ahead as FOMC Looms

• U.S. Treasuries are on track for a modestly higher start with longer tenors expected to show some early relative strength. However, the entire complex remains just below its best levels of the month ahead of today's expected 25-basis point rate cut from the FOMC. The FOMC will release its Statement at 14:00 ET, followed by Chairman Powell's press conference at 14:30 ET. In addition to the highly-anticipated rate cut, the Fed chairman is expected to hint at additional easing in the coming months. Treasury futures spent the bulk of the night in a sideways range, rising to highs during the past three hours. The gains have taken place alongside a mostly upbeat showing from other sovereign debt, including Japan's JGBs after a strong 20-yr bond auction. Crude oil trades lower while the U.S. Dollar Index is up 0.2% at 96.79.
• Yield Check:
  • 2-yr: -1 bp to 3.50%
  • 3-yr: UNCH at 3.47%
  • 5-yr: UNCH at 3.58%
  • 10-yr: -2 bps to 4.01%
  • 30-yr: -3 bps to 4.62%

• News:
  • China's government announced a series of measures aimed at increasing consumption through promotional activities.
  • The U.K.'s budget office is expected to reduce its productivity growth estimates ahead of the fall budget.
  • Germany is expected to announce that its borrowing in Q4 will be increased by EUR15 bln.
  • Japan's August trade deficit reached JPY242.5 bln (expected deficit of JPY513.6 bln; prior deficit of JPY118.4 bln) as imports fell 5.2% yr/yr (expected -4.2%; last -7.4%) and exports dropped 0.1% yr/yr (expected -1.9%; last -2.6%).
  • Singapore's August trade surplus reached $5.078 bln (last surplus of $6.351 bln) as non-oil exports fell 8.9% m/m (last -6.0%), dropping 11.3% yr/yr (expected 1.0%; last -4.7%). Q2 Unemployment Rate dipped to 2.0% from 2.1% (expected 2.1%).
  • Australia's August MI Leading Index was down 0.1% m/m (last 0.1%).
  • New Zealand's Q3 Westpac Consumer Sentiment fell to 90.9 from 91.2. Q2 Current Account deficit hit 3.7% of GDP (last 5.7% of GDP).
  • Eurozone's August CPI was up 0.1% m/m (expected 0.2%; last 0.0%), rising 2.0% yr/yr (expected 2.1%; last 2.0%). August Core CPI was up 0.3% m/m, as expected (last -0.2%), rising 2.3% yr/yr, as expected (last 2.3%).
  • U.K.'s August CPI was up 0.3% m/m, as expected (last 0.1%), rising 3.8% yr/yr, as expected (last 3.8%). August Core CPI was up 0.3% m/m (last 0.2%), rising 3.6% yr/yr (expected 3.7%; last 3.8%). August RPI was up 0.4% m/m (expected 0.5%: last 0.4%), rising 4.6% yr/yr (expected 4.7%; last 4.8%).
• Commodities:
  • WTI Crude: -0.7% to $64.07/bbl
  • Gold: -0.6% to $3701.80/ozt
  • Copper: -1.8% to $4.612/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1843
  • GBP/USD: UNCH at 1.3650
  • USD/CNH: -0.1% to 7.0966
  • USD/JPY: -0.1% to 146.27
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 29.7%; prior 9.2%)
  • 8:30 ET: August Housing Starts (Briefing.com consensus 1.375 mln; prior 1.428 mln) and Building Permits (Briefing.com consensus 1.370 mln; prior 1.362 mln)
  • 10:30 ET: Weekly crude oil inventories (prior +3.94 mln)
  • 14:00 ET: September FOMC Rate Decision (Briefing.com consensus 4.00-4.25%; prior 4.25-4.50%)