Bond Market Update

Pressure Persists Into New Week

• U.S. Treasuries began the week with losses that sent yields on 10s and 30s to fresh highs for the year while the front end outperformed but could not avoid a lower finish. The trading day started in flat fashion after a slow overnight session owed in part to holiday closures in China and South Korea. Investors received the final batch of Services PMI readings for September without any big surprises. France's reading (51.2) emerged from contraction in August, but it was overshadowed by growing concerns about rapidly rising OAT yields during the ongoing struggle to pass a budget. The 10-yr note and the 30-yr bond began sliding quickly after the cash start while the short end flashed some brief strength before giving in to some pressure. The outperformance up front held into the close, leaving the 2-yr yield up just a basis point for the day, while yields on 10s and 30s settled at their highest levels since 2022. Crude oil slipped toward its 50-day moving average (88.61) while the U.S. Dollar Index rose 0.2% to 102.17, its best level since April 2025.
• Yield Check:
  • 2-yr: +1 bp to 4.83%
  • 3-yr: UNCH at 4.96%
  • 5-yr: +1 bp to 5.07%
  • 10-yr: +3 bps to 5.31%
  • 30-yr: +4 bps to 5.67%

• News:
  • Bank of France Governor Moulin repeated his worries about France's fiscal situation, warning that high interest rates will strangle activity if there is no improvement in fiscal discipline, according to FT.
  • Brazil will head to a run-off presidential election on October 26 after Flavio Bolsonaro narrowly defeated incumbent President Lula da Silva in Sunday's vote.
  • Saudi Aramco lowered November oil prices for Asian buyers while raising rates for European customers.
  • Spain's Prime Minister Sanchez called a snap election for November 29.
  • Japan's September Household Confidence 35.4 (expected 35.3; prior 35.5); September S&P Global Services PMI 51.3 (expected 51.6; prior 52.5) and Composite PMI 52.3 (expected 52.5; prior 53.5)
  • Australia's September S&P Global Services PMI 51.9 (expected 51.4; prior 53.2) and Composite PMI 51.3 (expected 50.8; prior 52.7); September MI Inflation Gauge 0.3% m/m (prior 0.5%)
  • Eurozone's September HCOB Services PMI 53.0 (expected 53.0; prior 51.6) and Composite PMI 53.1 (expected 53.1; prior 52.0); August PPI 1.9% m/m (expected 1.9%; prior 1.6%) and 8.2% yr/yr (expected 8.1%; prior 5.8%); October Sentix Investor Confidence 2.7 (expected 4.5; prior 5.1)
  • Germany's September HCOB Services PMI 52.9 (expected 52.9; prior 49.7) and Composite PMI 53.8 (expected 53.8; prior 51.8)
  • France's September HCOB Services PMI 51.2 (expected 51.4; prior 48.0) and Composite PMI 51.1 (expected 51.2; prior 48.5)
  • Italy's September HCOB Services PMI 51.7 (expected 54.6; prior 55.2) and Composite PMI 51.0 (prior 53.6)
  • Spain's September HCOB Services PMI 58.3 (expected 57.1; prior 57.8)
  • U.K.'s September S&P Global Services PMI 52.1 (expected 51.7; prior 52.5) and Composite PMI 52.0 (expected 51.7; prior 52.5)
• Today's Data:
  • The ISM Services PMI decreased to 54.9% in September (Briefing.com consensus: 55.7%) from 55.4% in August. The dividing line between expansion and contraction is 50.0%, so the September reading reflects services sector activity growing at a slightly slower pace than the prior month.
    • The key takeaway from the report is the understanding that the prices paid by services organizations continue to increase. In turn, that will continue to feed concerns about pass-through effects for consumers.
  • The S&P Global U.S. Services PMI hit 58.8 in the final reading for September, up from 58.7 in the preliminary reading and up from August's final reading of 56.5.
• Commodities:
  • WTI crude: -1.9% to $89.33/bbl
  • Gold: -0.1% to $4157.40/ozt
  • Copper: +1.4% to $6.64/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1215
  • GBP/USD: -0.2% to 1.3219
  • USD/CNH: UNCH at 6.7042
  • USD/JPY: +0.1% to 158.00
• The Day Ahead:
  • 8:30 ET: August Trade Balance (Briefing.com consensus -$93.7 bln; prior -$88.6 bln)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results