Bond Market Update

Defending Early Gains

• U.S. Treasuries of most tenors are hanging onto their modest starting gains while the long bond has faced some early pressure, backing down from its starting high. Treasuries extended yesterday's advance at the start, holding steady through the release of a sizable batch of economic data. That batch showed slowing ADP Employment growth (54,000; Briefing.com consensus 69,000), a larger-than-expected increase in weekly Initial Claims (237,000; Briefing.com consensus 232,000), and a welcome upward revision to Q2 Productivity (to 3.3% from 2.4%), combined with a downward revision to Q2 Unit Labor Costs (to 1.0% from 1.6%). Not long ago, the ISM Services report for August (52.0%; Briefing.com consensus 50.5%) came in ahead of expectations, though the Employment component remained in contraction. Equities are off to a slightly higher start with the S&P 500 (+0.2%) returning to little changed for the week.
• Yield Check:
  • 2-yr: -1 bp to 3.60%
  • 3-yr: -2 bps to 3.56%
  • 5-yr: -2 bps to 3.66%
  • 10-yr: -2 bps to 4.19%
  • 30-yr: -1 bp to 4.88%