Bond Market Update

Solid Start to New Week

• U.S. Treasuries began the week on a firmly higher note with longer tenors leading the market higher. While the market recorded solid gains, the advance developed in quiet fashion, as Treasuries reached their best levels in the late morning, staying near their highs until the close. The market started in the green after a night that also featured gains in other sovereign debt. Treasuries backed down from their opening levels during the first 90 minutes of trade, but they found support right after the 2-yr note briefly dipped into the red. The early pullback also lifted the 5-yr yield just above its 50-day moving average (3.762%) before a subsequent bid sent action past opening highs. Today's economic data was limited to the Pending Home Sales report for August (4.0%; Briefing.com consensus 0.4%), which was well ahead of expectations thanks to a dip in mortgage rates. In Washington, Senate Majority Leader Thune said that a vote on another continuing resolution to fund the government for seven weeks will be held tomorrow, but a shutdown on October 1 remains likely. The Bureau of Labor Statistics confirmed today that it will not release the September Employment Situation report on Friday if the government shuts down. Crude oil retreated amid reports of a likely output increase from OPEC+ while the U.S. Dollar Index fell 0.3% to 97.90.
• Yield Check:
  • 2-yr: -2 bps to 3.63%
  • 3-yr: -3 bps to 3.63%
  • 5-yr: -3 bps to 3.74%
  • 10-yr: -5 bps to 4.14%
  • 30-yr: -6 bps to 4.70%

• News:
  • Securities and Exchange Commission Chair Atkins said that a proposal to allow semi-annual reporting of earnings is being fast tracked.
  • OPEC+ is expected to announce an output increase in November.
  • President Trump presented a plan to end the Gaza conflict.
  • Japan's LDP leadership election will take place on Saturday and there is still no clear frontrunner.
  • China Securities Times reported that banks are facing increasingly challenging bond market conditions going into the end of the quarter, prompting some hedging activity.
  • Spain saw its credit rating upgraded by Fitch, Moody's, and S&P over the weekend.
  • European Central Bank policymaker Makhlouf said that the central bank is near the bottom of its easing cycle.
  • China's August Industrial Profit was up 0.9% YTD (last -1.7%).
  • Japan's July Leading Index rose to 106.1 from 105.0 (expected 105.9) and Coincident Indicator was down 1.8% m/m (expected -2.6%; last 0.7%)
  • India's August Industrial Production was up 4.0% yr/yr (expected 5.0%; last 3.5%) and August Manufacturing Output was up 3.8% m/m (last 5.4%).
  • Eurozone's September Business and Consumer Survey rose to 95.5 from 95.3 (expected 95.2).
  • U.K.'s August Mortgage Lending reached GBP4.31 bln (expected GBP4.80 bln; last GBP4.51 bln) and net Lending to Individuals reached GBP6.00 bln (expected GBP6.30 bln; last GBP6.14 bln).
  • Italy's August non-EU trade surplus reached EUR1.78 bln (last surplus of EUR5.99 bln).
  • Spain's September CPI was down 0.4% m/m (expected -0.2%; last 0.0%) but up 2.9% yr/yr (expected 3.1%; last 2.7%). September Core CPI was up 2.3% yr/yr (last 2.4%). August Retail Sales rose 4.5% yr/yr (last 4.7%).
• Today's Data:
  • Pending Home Sales were up 4.0% in August (Briefing.com consensus 0.4%) after decreasing a revised 0.3% (from -0.4%) in July.
• Commodities:
  • WTI crude: -3.4% to $63.48/bbl
  • Gold: +1.2% to $3855.20/ozt
  • Copper: +2.3% to $4.89/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1731
  • GBP/USD: +0.3% to 1.3437
  • USD/CNH: -0.1% to 7.1270
  • USD/JPY: -0.6% to 148.62
• The Day Ahead:
  • 9:00 ET: July FHFA Housing Price Index (prior -0.2%) and July S&P Case-Shiller Home Price Index (Briefing.com consensus 1.9%; prior 2.1%)
  • 9:45 ET: September Chicago PMI (prior 41.5)
  • 10:00 ET: September Consumer Confidence (Briefing.com consensus 96.0; prior 97.4) and July job openings (prior 7.181 mln)