Bond Market Update

Pushing Higher After Sideways Night

• U.S. Treasuries are on track for a slightly higher start after a rangebound night in the futures market. Treasury futures slipped in early evening action, followed by a slow rise that produced highs at the start of the European session before a return to last night's lows. However, the past couple hours have seen a bounce to fresh highs. As for other sovereign debt, JGBs outperformed for the second night in a row while relative weakness in France's OATs produced a fresh 2026 high in France's 10-yr yield (5.020%). Economic data released overnight showed a deceleration in Japan's export growth and hotter-than-expected headline September inflation from the U.K., which lifted the year-over-year CPI rate to 3.5% from 3.1% in August. The U.S. session will be free of top-tier data, but the U.S. Treasury will hold a $13 bln 20-yr bond reopening at 13:00 ET. Crude oil hovers below $100/bbl while the U.S. Dollar Index is flat at 101.67.
• Yield Check:
  • 2-yr: -1 bp to 4.78%
  • 3-yr: -1 bp to 4.86%
  • 5-yr: -2 bps to 4.92%
  • 10-yr: -2 bps to 5.10%
  • 30-yr: -2 bps to 5.41%

• News:
  • The Bank of Korea will meet overnight, but it is not expected to increase its policy rate from the current 3.00%.
  • South Korea's exports through the first 20 days of October were up 105.4% with chip exports jumping 222.5%.
  • Former Bank of Japan executive director said that quarterly rate hikes are likely to continue.
  • Reserve Bank of Australia Governor Hauser acknowledged that the inflation outlook has worsened since August.
  • Japan's September Trade Balance -JPY536.6 bln (expected -JPY181.0 bln; prior -JPY1,111.9 bln), with exports +16.7% yr/yr (expected +20.1%; prior +19.3%) and imports +18.9% yr/yr (expected +19.6%; prior +28.0%).
  • South Korea's September PPI +0.2% m/m (prior +0.1%) and +7.7% yr/yr (prior +7.9%).
  • New Zealand's September Credit Card Spending +6.9% yr/yr (prior +3.6%).
  • U.K.'s September CPI +0.4% m/m (expected +0.3%; prior +0.5%) and +3.5% yr/yr (expected +3.4%; prior +3.1%); Core CPI +0.2% m/m (expected +0.2%; prior +0.3%) and +2.8% yr/yr (expected +2.8%; prior +2.6%). September PPI Input +1.5% m/m (expected +1.3%; prior +0.5%) and +8.3% yr/yr (expected +7.2%; prior +6.7%); PPI Output +0.8% m/m (expected +0.7%; prior +0.7%) and +4.6% yr/yr (expected +4.3%; prior +3.8%). September Public Sector Net Borrowing GBP24.50 bln (expected GBP23.80 bln; prior GBP18.30 bln).
  • Switzerland's September M3 Money Supply CHF1,238.9 bln (prior CHF1,239.5 bln).
• Commodities:
  • WTI Crude: +0.8% to $98.58/bbl
  • Gold: +0.4% to $4158.50/ozt
  • Copper: -0.8% to $6.549/lb
• Currencies:
  • EUR/USD: UNCH at 1.1233
  • GBP/USD: +0.2% to 1.3400
  • USD/CNH: UNCH at 6.6749
  • USD/JPY: -0.2% to 157.86
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -5.3%; prior -2.7%)
  • 10:30 ET: Weekly crude oil inventories (prior -8.56 mln)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results