Bond Market Update

Okay for Now

• U.S. Treasuries are looking okay now, but they had some struggles in the overnight trade, with the 2-yr note yield pushing up to 4.92% and the 10-yr note yield reaching 5.34%, its highest level since 2002. Trend momentum, rising oil prices, and a view from Minneapolis Fed President Kashkari (FOMC voter) that he is expecting one more rate hike this year and another next year contributed to the weakness. Yields eventually reversed course, though, garnering a bid from a short-term oversold condition that may have precipitated some short-covering activity. Energy-driven inflation concerns persist, however, with China's refiners banning fuel exports in October, according to Reuters, and diplomatic relations between the U.S. and Iran remaining strained (to put it mildly). Today will be a busy day of Fedspeak that is accompanied by the Treasury's $6 billion repurchase operation and a batch of economic data that includes weekly initial jobless claims and the September ISM Manufacturing Index.
• Yield Check:
  • 2-yr: -3 bps to 4.86%
  • 3-yr: -3 bps to 4.97%
  • 5-yr: -2 bps to 5.07%
  • 10-yr: -2 bps to 5.28%
  • 30-yr: -1 bp to 5.63%

• News:
  • China considers targeted fiscal support. Bloomberg
  • President Trump told reporters that Jerome Powell should resign from the Fed board. Bloomberg
  • Senate confirms Keith Sonderling as Secretary of Labor. Congress is now on recess until after the midterm elections. Washington Post
  • Chinese refiners suspended October fuel exports. Reuters
  • The Trump administration is telling European governments to release diesel from their own strategic reserves or face an export ban. Reuters
  • Class 8 used retail truck sales declined 24%. Act Research
  • U.S. slowing aircraft part exports to China to gain leverage in trade talks. Reuters
  • South Korea unveils $22.3 bln Texas gas power project to support AI data centers, according to Reuters
  • Eurozone's September HCOB Manufacturing PMI 52.9 (expected 52.7; prior 52.7)
• Commodities:
  • WTI crude: +1.6% to $91.83/bbl
  • Gold: +0.4% to $4,202.40/ozt
  • Copper: -1.0% to $6.56/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1295
  • GBP/USD: -0.3% to 1.3229
  • USD/CNH: +0.1% to 6.7169
  • USD/JPY: +0.3% to 157.95
• The Day Ahead:
  • 08:30 ET: Initial Jobless Claims (Briefing.com consensus: 200K; prior 197K) and Continuing Jobless Claims (prior 1719K)
  • 09:05 ET: Richmond Fed President Barkin (non-FOMC voter), Boston Fed President Collins (non-FOMC voter), and Kansas City Fed President Schmid (non-FOMC voter)
  • 09:30 ET: ECB President Lagarde
  • 09:45 ET: September S&P Global U.S. Manufacturing PMI - Final (Briefing.com consensus: 55.3; prior 57.0)
  • 10:00 ET: August Construction Spending (Briefing.com consensus: 0.3%; prior -0.1%)
  • 10:00 ET: September ISM Manufacturing Index (Briefing.com consensus: 55.2%; prior 54.6%)
  • 10:00 ET: Fed Governor Waller (FOMC voter)
  • 10:30 ET: EIA Natural Gas Inventories (prior +53 bcf)
  • 13:30 ET: Fed Governor Jefferson (FOMC voter)
  • 15:00 ET: Fed Governor Bowman (FOMC voter)
  • 15:30 ET: New York Fed President Williams (FOMC voter), Fed Governor Cook (FOMC voter)
  • 18:45 ET: Dallas Fed President Logan (FOMC voter)