Bond Market Update

Inching Higher

• U.S. Treasuries are on track for a higher start with the short end expected to show some relative strength. Treasury futures faced some light pressure during the Asian session, but the slim losses were reversed once the focus shifted to action in Europe. Political uncertainty has been the theme of the night after Japan's Prime Minister Ishiba announced his resignation after 12 months on the job while French Prime Minister Bayrou is expected to lose a confidence vote after spending just nine months in his post. Economic data released overnight showed solid Q2 GDP from Japan and a trade balance report from China that showed a larger-than-expected surplus, though import/export growth missed estimates. In the U.S., President Trump said that Christopher Waller, Kevin Hassett, and Kevin Warsh are among the three finalists for the Fed Chairman nomination. Crude oil is bouncing from last week's slide to a three-month low while the U.S. Dollar Index is down 0.1% at 97.65.
• Yield Check:
  • 2-yr: -2 bps to 3.49%
  • 3-yr: -1 bp to 3.47%
  • 5-yr: UNCH at 3.58%
  • 10-yr: -1 bp to 4.08%
  • 30-yr: -1 bp to 4.77%

• News:
  • President Trump signed an executive order exempting gold, tungsten, and uranium from tariffs.
  • China will reopen its bond market to Russian energy firms looking to raise funds, according to FT.
  • Swiss National Bank President Schlegel said that the central bank will not hesitate to act, but the bar for the next cut is high.
  • Italy's Finance Minister Giorgetti said that the government continues expecting 0.6% growth for 2025.
  • China's August trade surplus reached $102.33 bln (expected surplus of $99.40 bln; last surplus of $98.24 bln) as imports grew 1.3% yr/yr (expected 3.0%; last 4.1%) and exports rose 4.4% yr/yr (expected 5.0%; last 7.2%).
  • Japan's Q2 GDP expanded 0.5% qtr/qtr (expected 0.3%; last 0.1%) and GDP annualized grew 2.2% (expected 1.0%; last -0.2%). Q2 GDP Capital Expenditure was up 0.6% qtr/qtr (expected 1.3%; last 0.7%), Q2 GDP External Demand was up 0.3% qtr/qtr, as expected (last -0.8%), GDP Private Consumption was up 0.4% qtr/qtr (expected 0.2%; last 0.0%), and Q2 GDP Price Index was up 3.0%, as expected (last 3.3%). July Current Account surplus reached JPY1.88 trln (expected JPY2.60 trln; last JPY2.40 trln). July Economy Watchers Current Index rose to 46.7 from 45.2 (expected 45.6).
  • Australia's July Building Approvals were down 8.2% m/m, as expected (last 12.2%) and Private House Approvals rose 1.1% m/m, as expected (last -2.0%).
  • Eurozone's September Sentix Investor Confidence fell to -9.2 from -3.7 (expected -2.2).
  • Germany's July Industrial Production was up 1.3% m/m (expected 1.1%; last -0.1%), rising 1.5% yr/yr (last -1.8%). July trade surplus reached EUR14.7 bln (expected surplus of EUR15.7 bln; last surplus of EUR15.4 bln) as imports fell 0.1% m/m (last 4.1%) and exports were down 0.6% m/m (last 1.1%).
  • Spain's July Consumer Confidence rose to 82.9 from 76.1.
• Commodities:
  • WTI Crude: +1.8% to $62.96/bbl
  • Gold: +0.1% to $3655.40/ozt
  • Copper: +0.3% to $4.564/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1725
  • GBP/USD: +0.2% to 1.3530
  • USD/CNH: UNCH at 7.1251
  • USD/JPY: +0.3% to 147.79
• Data out Today:
  • 15:00 ET: July Consumer Credit (Briefing.com consensus $10.5 bln; prior $7.4 bln)