Bond Market Update

Long End Ahead

• U.S. Treasuries are on track for a mixed start with the front end expected to show some early weakness while longer tenors are seeking a modestly higher open. Treasury futures inched higher through the early part of the night, spending the Asian session near their highs before some backtracking over the past few hours. There has been some movement in other sovereign debt with France's OATs seeing continued pressure while JGBs had a good showing with help from a strong 20-yr JGB auction. Economic data released overnight included solid August employment figures from the U.K., lifting the market's expectations for a November rate hike from the Bank of England. Crude oil has rallied past its September high, reaching a level not seen since mid-April, even though Iran's foreign ministry said that it would prefer diplomacy over escalating the conflict. The U.S. Dollar Index is down 0.1% at 101.90.
• Yield Check:
  • 2-yr: +1 bp to 4.77%
  • 3-yr: +1 bp to 4.86%
  • 5-yr: UNCH at 4.93%
  • 10-yr: -2 bps to 5.12%
  • 30-yr: -3 bps to 5.44%

• News:
  • British Chancellor Healey is ruling out an increase to the capital gains tax in the upcoming Autumn budget.
  • Germany's Chancellor Merz and France's President Macron called for an agreement on an EU budget before the end of the year.
  • China's PBoC left its one-year Loan Prime Rate unchanged at 3.00%, in line with expectations, and maintained the five-year Loan Prime Rate at 3.50%, also as expected.
  • Eurozone August Current Account EUR8.7 bln (expected EUR29.2 bln; prior EUR27.2 bln) and Construction Output +1.85% m/m (prior +0.19%).
  • Germany's September PPI +1.9% m/m (expected +1.5%; prior +1.1%) and +6.7% yr/yr (expected +6.3%; prior +4.6%). October ZEW Economic Sentiment 28.1 (expected 30.2; prior 34.7) and Current Conditions -35.9 (expected -45.0; prior -47.1); Eurozone ZEW Economic Sentiment 18.5 (expected 23.6; prior 25.8)
  • U.K.'s August Unemployment Rate 4.7% (expected 4.9%; prior 4.9%); Employment Change +102K (expected +20K; prior +67K); Average Earnings including bonuses +3.7% yr/yr (expected +3.8%; prior +3.9%) and excluding bonuses +3.7% (expected +3.6%; prior +3.6%). September Claimant Count Change +30.3K (expected +19.4K; prior +7.0K)
• Commodities:
  • WTI Crude: +6.1% to $110.00/bbl
  • Gold: -0.5% to $4139.30/ozt
  • Copper: UNCH at $6.574/lb
• Currencies:
  • EUR/USD: UNCH at 1.1209 
  • GBP/USD: +0.3% to 1.3342
  • USD/CNH: -0.1% to 6.6770
  • USD/JPY: -0.2% to 158.16
• Data out Today:
  • 8:30 ET: September Housing Starts (Briefing.com consensus 1.305 mln; prior 1.275 mln) and Building Permits (Briefing.com consensus 1.390 mln; prior 1.394 mln)
  • 10:00 ET: September Pending Home Sales (Briefing.com consensus 0.1%; prior 0.3%)