Bond Market Update

Longer Tenors Resist Intraday Pressure

• U.S. Treasuries had a mostly higher start to the holiday-shortened week, but the front end finished flat after reversing from a higher start while longer tenors held onto a portion of their starting gains. The trading day started with gains across the curve that had the 30-yr yield starting the session at its lowest level in two weeks, but the market could not sustain its strong start. Instead, Treasuries backtracked about 30 minutes after the open, continuing their retreat until the short end turned negative in mid-morning trade with some help from an upward push in the price of oil. Afternoon action saw some late buying, which returned the 2-yr note to little changed while longer tenors kept a portion of their gains. Today's economic data was limited to the Existing Home Sales report for September (3.99 mln; Briefing.com consensus 3.96 mln), which beat expectations, but still showed lower year-over-year sales in all four geographical regions. The report had little impact on the market, but tomorrow morning will bring the release of September CPI (Briefing.com consensus 0.6%; prior 0.4%) and Core CPI (Briefing.com consensus 0.2%; prior 0.3%), which will surely garner attention. Crude oil finished the day just above $94/bbl while the U.S. Dollar Index fell 0.4% to 102.19, reversing from its highest level since April 2025.
• Yield Check:
  • 2-yr: UNCH at 4.79%
  • 3-yr: -1 bp to 4.92%
  • 5-yr: -1 bp to 5.01%
  • 10-yr: -2 bps to 5.22%
  • 30-yr: -4 bps to 5.56%

• News:
  • New York Fed President (permanent FOMC voter) Williams said that he expects that one more rate hike will be needed this year, but he does not see the need for more hikes in 2027.
  • Visa (V) received approval to set the groundwork for a bank card clearing facility in China.
  • A Bank of Japan survey showed that Japanese households expect prices to rise by an average of 11.8% a year from now.
  • The IMF began its semi-annual meetings yesterday, which will continue through Sunday. The Fund raised its 2026 global growth target to 3.1% from 3.0% and kept the forecast for 2027 at 3.4%.
  • The Reserve Bank of Australia expressed concern in its minutes that pausing hikes while global rates are on the rise would exert downward pressure on the Australian dollar.
  • Japan's September PPI -0.3% m/m (expected 0.5%; prior -0.3%) and 6.8% yr/yr (expected 7.6%; prior 7.6%); Bank Lending 5.3% yr/yr (expected 5.5%; prior 5.3%).
  • Australia's September NAB Business Confidence -13 (prior -9) and NAB Business Survey -1 (prior -1).
  • Germany's September CPI 0.6% m/m (expected 0.6%; prior 0.2%) and 3.3% yr/yr (expected 3.3%; prior 2.9%); HICP 0.6% m/m (expected 0.6%; prior 0.2%) and 3.3% yr/yr (expected 3.3%; prior 2.9%).
  • U.K.'s September BRC Retail Sales Monitor 1.0% yr/yr (expected 0.8%; prior 0.5%).
• Today's Data:
  • Existing home sales increased 1.5% month-over-month in September to a seasonally adjusted annual rate of 3.99 million (Briefing.com consensus 3.96 million) from a downwardly revised 3.93 million (from 3.98 million) in August. Sales were down 2.2% on a year-over-year basis.
    • The key takeaway from the report is that year-over-year sales were down in all four regions, reflecting persistent headwinds from high mortgage rates. As a result, August and September have been the slowest two months for home sales so far in 2026.
  • The NFIB Small Business Optimism Index fell to 97.9 in September (Briefing.com consensus 98.0) from 98.7 in August.
• Commodities:
  • WTI crude: +0.3% to $94.06/bbl
  • Gold: -0.3% to $4176.60/ozt
  • Copper: -0.3% to $6.73/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1201
  • GBP/USD: +0.4% to 1.3255
  • USD/CNH: UNCH at 6.6929
  • USD/JPY: -0.2% to 158.31
• The Day Ahead:
  • 7:00 ET: Wednesday: Weekly MBA Mortgage Index (prior -4.2%)
  • 8:30 ET: September CPI (Briefing.com consensus 0.6%; prior 0.4%) and Core CPI (Briefing.com consensus 0.2%; prior 0.3%)
  • 14:00 ET: October Beige Book