Bond Market Update

Post-FOMC Slide Extended

• U.S. Treasuries finished Thursday with losses across the curve after quickly giving back their slim opening gains. Treasuries followed yesterday's post-FOMC retreat with a modestly higher start that faced resistance immediately after the open with solid economic data contributing to the early selling. Weekly Initial Claims dropped from their highest level since mid-2023 while the Philadelphia Fed Survey (23.2; Briefing.com consensus 3.0) showed an acceleration in manufacturing activity. Treasuries reached their lows about 90 minutes after the start, followed by a slow rise off lows in midday trade, though they never made it back to their starting levels. Today's selling lifted yields on 5s and shorter tenors to the midpoint of this month's range ahead of tomorrow's session that will be free of economic data. Crude oil fell back below $64/bbl while the U.S. Dollar Index rose 0.5% to 97.35.
• Yield Check:
  • 2-yr: +2 bps to 3.57%
  • 3-yr: +2 bps to 3.55%
  • 5-yr: +1 bp to 3.66%
  • 10-yr: +3 bps to 4.10%
  • 30-yr: +5 bps to 4.72%

• News:
  • House Speaker Johnson said that there are enough votes to pass a continuing resolution to fund the government through November 20.
  • Hong Kong Monetary Authority followed the FOMC rate cut with a 25-basis point cut of its own, which was expected.
  • The Bank of England voted 7-2 in favor of keeping its bank rate at 4.00%.
  • 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.
  • 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).
• Today's Data:
  • Initial jobless claims for the week ending September 13 decreased by 33,000 to 231,000 (Briefing.com consensus: 245,000) following an upwardly revised 264,000 (from 263,000) in the prior week. Continuing jobless claims for the week ending September 6 decreased by 7,000 to 1.920 million.
    • The key takeaway from the report is that initial claims settled back from what appeared to be an aberrantly high level in the prior week, returning to an area that is more consistent with a job market where layoff activity is relatively low.
  • The Philadelphia Fed Index surged to 23.2 for September (Briefing.com consensus: 3.0) from -0.3 in August, with the new orders index climbing to 12.4 from -1.9 and the prices paid index dropping to 46.8 from 66.8. The dividing line between expansion and contraction for this report is 0.0, so the September reading represents an acceleration in manufacturing activity in the Philadelphia Fed region.
    • The key takeaway from the report is found in the welcome combination of stronger growth and fading prices.
  • Conference Board's Leading Economic Index was down 0.5% in August (Briefing.com consensus -0.1%) after a revised 0.1% increase (from -0.1%) in July.
  • Weekly natural gas inventories increased by 90 bcf after increasing by 71 bcf a week ago.
  • The U.S. Treasury sold $19 bln in 10-yr TIPS at a high yield of 1.734% with a bid-to-cover ratio of 2.20x.
• Commodities:
  • WTI crude: -1.2% to $63.27/bbl
  • Gold: -1.1% to $3678.40/ozt
  • Copper: -0.7% to $4.60/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1786
  • GBP/USD: -0.6% to 1.3551
  • USD/CNH: +0.1% to 7.1092
  • USD/JPY: +0.7% to 147.89
• No Data on Tomorrow's Schedule