Bond Market Update

Long End Ahead as August Jobs Report Looms

• U.S. Treasuries are on track for a slightly higher start in longer tenors ahead of the 8:30 ET release of the Employment Situation Report for August (Briefing.com consensus 78,000; prior 73,000), which will factor into the market's rate cut expectations, though going into the report, the fed funds futures market is all but certain that a rate cut will be announced on September 17. Treasury futures spent the night in a narrow range, dipping to lows at the start of the European session, followed by a return to overnight highs. Japan's trade deal with the U.S. was finalized last evening, lowering the tariff on Japanese auto imports to 15.0% from 27.5%. In Europe, Germany's Factory Orders for July (-2.9%; expected 0.5%) were down sharply, but the market does not expect the European Central Bank to announce a rate cut next week. Crude oil is revisiting its August low while the U.S. Dollar Index is down 0.4% at 98.00.
• Yield Check:
  • 2-yr: UNCH at 3.59%
  • 3-yr: UNCH at 3.55%
  • 5-yr: -1 bp to 3.64%
  • 10-yr: -2 bps to 4.16%
  • 30-yr: -2 bps to 4.85%

• News:
  • China will implement a 78% tariff on imports of U.S. fiber optic products, according to Caixin.
  • China Securities Journal speculated that the People's Bank of China will inject liquidity into money markets this month.
  • The European Central Bank will meet next week, but another rate cut is not expected until later in the year.
  • French Prime Minister Bayrou will face a confidence vote on Monday.
  • Japan's July Household Spending rose 1.7% m/m (expected 1.3%; last -5.2%), increasing 1.4% yr/yr (expected 2.2%; last 1.3%). July Overall Wage Income was up 4.1% yr/yr (expected 3.0%; last 3.1%) and Overtime Pay was up 3.3% yr/yr (last 0.5%). July Leading Index rose to 105.9 from 105.6 (expected 105.8) and Coincident Indicator was down 2.6% m/m (last 0.3%).
  • Singapore's July Retail Sales were up 4.1% m/m (last -1.1%), rising 4.8% yr/yr (last 2.4%).
  • Eurozone's Q2 GDP expanded 0.1% qtr/qtr, as expected (last 0.6%), growing 1.5% yr/yr (expected 1.4%; last 1.5%). Q2 Employment increased by 0.1% qtr/qtr, as expected (last 0.2%), rising 0.6% yr/yr (expected 0.7%; last 0.7%).
  • Germany's July Factory Orders were down 2.9% m/m (expected 0.5%; last -0.2%).
  • U.K.'s July Retail Sales rose 0.6% m/m (expected 0.3%; last 0.3%), increasing 1.1% yr/yr (expected 1.3%; last 0.9%). July Core Retail Sales were up 0.5% m/m (expected 0.4%; last 0.6%), rising 1.3% yr/yr (expected 1.2%; last 1.3%). August Halifax House Price Index was up 0.3% m/m (expected 0.2%; last 0.4%), rising 2.2% yr/yr (expected 2.0%; last 2.5%).
  • France's July trade deficit reached EUR5.6 bln (expected deficit of EUR7.3 bln; last deficit of EUR7.2 bln) and July Current Account deficit reached EUR2.50 bln (last deficit of EUR2.30 bln).
  • Italy's July Retail Sales were unchanged m/m (expected 0.2%; last 0.7%), rising 1.8% yr/yr (last 1.1%).
  • Swiss August SECO Consumer Climate fell to -40 from -33 (expected -37).
• Commodities:
  • WTI Crude: -0.7% to $63.06/bbl
  • Gold: UNCH at $3607.60/ozt
  • Copper: +0.7% to $4.589/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1679
  • GBP/USD: +0.3% to 1.3468
  • USD/CNH: UNCH at 7.1658
  • USD/JPY: -0.1% to 148.23
• Data out Today:
  • 8:30 ET: August Nonfarm Payrolls (Briefing.com consensus 78,000; prior 73,000), Nonfarm Private Payrolls (Briefing.com consensus 90,000; prior 83,000), Unemployment Rate (Briefing.com consensus 4.3%; prior 4.2%), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.3%), and Average Workweek (Briefing.com consensus 34.3; prior 34.3)