Bond Market Update

Flight to Safety Offers Early Boost

• U.S. Treasuries are on track for a firmly higher start with longer tenors set to show relative strength ahead of the 8:30 ET release of a big batch of data that will include PPI (Briefing.com consensus 0.5%; prior 0.4%) and Retail Sales (Briefing.com consensus 0.3%; prior 1.2%) for September. Treasury futures spent the night in a steady rise alongside other sovereign debt while global technology stocks faced heavy pressure with South Korea's Kospi plunging nearly 8% to its lowest close since April. Accordingly, Nasdaq futures are down about 1.0%. Economic data released overnight included weak industrial production from the eurozone (-0.5%; expected 0.0%) but the performance of AI-related technology stocks has dominated the conversation with the market focusing on names with a heavy debt load. Crude oil remains above $95/bbl while the U.S. Dollar Index is down 0.5% at 102.05, turning slightly negative for the week.
• Yield Check:
  • 2-yr: -5 bps to 4.75%
  • 3-yr: -7 bps to 4.84%
  • 5-yr: -9 bps to 4.90%
  • 10-yr: -10 bps to 5.09%
  • 30-yr: -10 bps to 5.43%

• News:
  • There was a growing belief that the Reserve Bank of Australia will hold its policy steady at the next meeting after the release of a weak jobs report for September.
  • German Chancellor Merz cautioned that negotiating the EU's seven-year budget will be difficult, but he is hopeful for an agreement before the end of the year.
  • British Chancellor Healey signaled that he intends to follow the IMF's guidance for continuing to reduce the deficit in the upcoming Autumn budget.
  • Japan's August Core Machinery Orders 5.2% m/m (expected 2.2%; prior -3.7%) and 18.6% yr/yr (expected 15.7%; prior 11.2%); Industrial Production -2.4% m/m (expected -1.7%; prior -0.2%) and Capacity Utilization -4.2% m/m (prior 0.5%).
  • South Korea's September Trade Balance $49.97 bln (expected $49.85 bln; prior $34.79 bln); Exports 83.7% yr/yr (expected 83.5%; prior 68.7%) and Imports 26.0% yr/yr (expected 26.0%; prior 22.4%).
  • Australia's September Employment Change -39.3K (expected 19.6K; prior 29.3K), Full Employment Change 34.4K (prior -4.0K), Unemployment Rate 4.7% (expected 4.6%; prior 4.7%), and Participation Rate 66.8% (expected 67.0%; prior 67.0%).
  • Eurozone August Industrial Production -0.5% m/m (expected 0.0%; prior -0.3%) and -1.1% yr/yr (expected -0.1%; prior -0.3%).
  • U.K.'s August GDP 0.1% m/m (expected -0.1%; prior 0.4%) and 2.1% yr/yr (expected 1.7%; prior 1.8%); three-month GDP growth 0.7% (expected 0.5%; prior 0.5%). August Industrial Production 0.8% m/m (expected -0.1%; prior 0.3%) and 1.6% yr/yr (expected 0.7%; prior 0.8%); Manufacturing Production 1.2% m/m (expected -0.1%; prior 1.0%) and 3.0% yr/yr (expected 2.3%; prior 2.2%). August Trade Balance -GBP18.01 bln (expected -GBP21.90 bln; prior -GBP19.30 bln); Construction Output -0.2% m/m (expected 0.0%; prior -0.5%) and -1.8% yr/yr (expected -1.6%; prior -1.9%).
  • France's September CPI -0.3% m/m (expected -0.3%; prior 0.7%) and 3.1% yr/yr (expected 3.0%; prior 2.4%); HICP -0.3% m/m (expected -0.4%; prior 0.4%) and 3.4% yr/yr (expected 3.4%; prior 3.4%).
  • Switzerland's September PPI 0.3% m/m (expected 0.6%; prior 0.7%) and -0.2% yr/yr (prior -0.7%).
• Commodities:
  • WTI Crude: +0.3% to $95.37/bbl
  • Gold: +1.6% to $4171.40/ozt
  • Copper: -1.3% to $6.575/lb
• Currencies:
  • EUR/USD: +0.5% to 1.1209
  • GBP/USD: +0.5% to 1.3248
  • USD/CNH: -0.1% to 6.6915
  • USD/JPY: -0.2% to 157.96
• Data out Today:
  • 8:30 ET: September PPI (Briefing.com consensus 0.5%; prior 0.4%), Core PPI (Briefing.com consensus 0.3%; prior 0.2%), September Retail Sales (Briefing.com consensus 0.3%; prior 1.2%), Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 1.4%), weekly Initial Claims (Briefing.com consensus 200,000; prior 197,000), Continuing Claims (prior 1.716 mln), October Empire State Manufacturing (Briefing.com consensus 7.0; prior 7.6), and October Philadelphia Fed (Briefing.com consensus 29.0; prior 37.8)
  • 10:00 ET: August Business Inventories (Briefing.com consensus 0.4%; prior 0.8%)
  • 10:30 ET: Weekly natural gas inventories (prior +85 bcf)
  • 12:00 ET: Weekly crude oil inventories (prior -3.186 mln)