Bond Market Update

Trimming Post-FOMC Losses

• U.S. Treasuries are on track for a modestly higher start after yesterday's post-FOMC volatility that sent most tenors to fresh lows for the day. Treasury futures inched higher during the early part of the night, reaching their best levels shortly after the focus turned to action in Europe. There was some more central bank activity as the Hong Kong Monetary Authority followed the FOMC rate cut with a 25-basis point cut of its own, which was expected. In Europe, the Bank of England voted 7-2 in favor of keeping its bank rate at 4.00% while Norges Bank lowered its policy rate by 25 basis points to 4.00% and forecast one rate cut per year over the next three years. Crude oil holds a modest gain near $64.50/bbl while the U.S. Dollar Index is up 0.2% at 97.03.
• Yield Check:
  • 2-yr: -2 bps to 3.53%
  • 3-yr: -2 bps to 3.51%
  • 5-yr: -2 bps to 3.63%
  • 10-yr: -2 bps to 4.06%
  • 30-yr: -1 bp to 4.67%

• News:
  • Westpac expects the Reserve Bank of New Zealand to make two rate cuts before the end of the year.
  • President Trump will meet with British Prime Minister Starmer today.
  • Germany's debt office confirmed that it plans to sell an additional EUR15 bln worth of debt in Q4.
  • Japan's July Core Machinery Orders were down 4.6% m/m (expected -1.8%; last 3.0%) but up 4.9% yr/yr (expected 5.4%; last 7.6%).
  • Australia's August Employment decreased by 5,400 (expected 21,200; last 26,500) and full Employment fell 40,900 (last 63,600). August Unemployment Rate remained at 4.2%, as expected, and August Participation Rate fell to 66.8% from 67.0% (expected 67.0%).
  • New Zealand's Q2 GDP contracted 0.9% qtr/qtr (expected -0.3%; last 0.9%), falling 0.6% yr/yr (expected 0.0%; last -0.6%).
  • Eurozone's July Current Account surplus reached EUR27.7 bln (expected surplus of EUR34.6 bln; last surplus of EUR35.8 bln). July Construction Output was up 0.48% m/m (last -0.66%).
  • Swiss August trade surplus reached CHF4.009 bln (expected CHF5.220 bln; last CHF4.619 bln).
• Commodities:
  • WTI Crude: +0.6% to $64.38/bbl
  • Gold: -0.5% to $3699.80/ozt
  • Copper: -0.4% to $4.616/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1831
  • GBP/USD: UNCH at 1.3624
  • USD/CNH: UNCH at 7.1015
  • USD/JPY: +0.3% to 147.35
• Data out Today:
  • 8:30 ET: September Philadelphia Fed Survey (Briefing.com consensus 3.0; prior -0.3), weekly Initial Claims (Briefing.com consensus 245,000; prior 263,000), and Continuing Claims (prior 1.939 mln)
  • 10:00 ET: August Leading Indicators (Briefing.com consensus -0.1%; prior -0.1%)
  • 10:30 ET: Weekly natural gas inventories (prior +71 bcf)
  • 16:00 ET: July Net Long-Term TIC Flows (prior $150.8 bln)