Bond Market Update

Short End Behind

• U.S. Treasuries are on track for a slightly lower start after a recent slide to lows in Treasury futures. The market spent the bulk of the night in a sideways range with a brief swoon near the end of the Asian session. Treasury futures recovered those losses swiftly, but they have returned to their overnight lows during the past hour. Overnight action featured some speculation about an October rate hike from the Bank of Japan while an ECB policymaker declared victory, saying that the central bank's inflation target has been met. The U.S. session will feature a big batch of data, including the third estimate of Q2 GDP (Briefing.com consensus 3.3%), and a $44 bln 7-yr Treasury note auction at 13:00 ET. Crude oil is staying near its 50-day moving average (54.53) while the U.S. Dollar Index is little changed at 97.90.
• Yield Check:
  • 2-yr: +2 bps to 3.62%
  • 3-yr: +2 bps to 3.62%
  • 5-yr: +2 bps to 3.73%
  • 10-yr: +1 bp to 4.16%
  • 30-yr: UNCH at 4.76%

• News:
  • Former Bank of Japan policymaker Sakurai said that he sees a potential for a rate increase in October.
  • Japan is planning to reduce its issuance of longer-dated JGBs.
  • Some South Korean officials are hesitant to commit to the investment deal with the U.S. unless safeguards like currency swaps are put into place.
  • China's Ministry of Commerce aims to increase digital consumption.
  • The Swiss National Bank left its policy rate at 0.00%, as expected.
  • European Central Bank policymaker Kazimir said that the ECB's inflation target has been met.
  • Japan's August Corporate Services Price Index was up 2.7% yr/yr (expected 2.9%; last 2.6%).
  • Hong Kong's August trade deficit reached $25.4 bln (last deficit of $34.1 bln) as imports grew 11.5% m/m (last 16.5%) and exports rose 14.5% m/m (last 14.3%).
  • Eurozone's August M3 Money Supply was up 2.9% yr/yr (expected 3.3%; last 3.4%), August Private Sector Loans grew 2.5% yr/yr (expected 2.3%; last 2.4%), and August loans to nonfinancials increased 3.0% yr/yr (last 2.8%).
  • Germany's October GfK Consumer Climate rose to -22.3 from -23.5 (expected -23.3).
  • U.K.'s September CBI Distributive Trades Survey rose to -29 from -32 (expected -31).
  • France's September Consumer Confidence remained at 87, as expected.
• Commodities:
  • WTI Crude: -0.3% to $64.81/bbl
  • Gold: +0.4% to $3781.90/ozt
  • Copper: +0.7% to $4.849/lb
• Currencies:
  • EUR/USD: UNCH at 1.1737
  • GBP/USD: -0.2% to 1.3421
  • USD/CNH: -0.1% to 7.1316
  • USD/JPY: UNCH at 148.82
• Data out Today:
  • 8:30 ET: Q2 GDP -- third estimate (Briefing.com consensus 3.3%; prior 3.3%), Q2 GDP Deflator -- third estimate (Briefing.com consensus 2.0%; prior 2.0%), August Durable Orders (Briefing.com consensus -0.5%; prior -2.8%), Durable Orders ex-transport (Briefing.com consensus -0.1%; prior 1.1%), weekly Initial Claims (Briefing.com consensus 238,000; prior 231,000), Continuing Claims (prior 1.920 mln), August advance International Goods Trade Balance (prior -$103.6 bln), August advance Retail Inventories (prior 0.2%), and August advance Wholesale Inventories (prior 0.2%)
  • 10:00 ET: August Existing Home Sales (Briefing.com consensus 3.99 mln; prior 4.01 mln)
  • 10:30 ET: Weekly crude oil inventories (prior +90 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results