Bond Market Update

Trimming Monday Losses

• U.S. Treasuries are on track for a higher start, looking to bounce from their poor start to the week. Treasury futures began climbing during the latter portion of the Asian session, continuing their advance into the night. With the early rally, longer tenors are set to recover yesterday's losses right at the open while other sovereign debt has also climbed overnight. France's OATs have taken part in the overnight advance, pressuring yields from their highest levels of the year. Marine Le Pen, who will be a candidate in the presidential election in April, said that she will aim for EUR140 bln in spending cuts over five years, up from her previous plan for EUR125 bln in savings. Economic data released overnight showed a sharp drop in Germany's factory orders for August (-10.6%; expected -0.9%), suggesting persistent challenges in Europe's growth engine. The domestic data slate will be limited to the 8:30 ET release of the August Trade Balance (Briefing.com consensus -$93.7 bln; prior -$88.6 bln) and the U.S. Treasury will sell $58 bln in 3-yr notes this afternoon. Crude oil is falling toward $85/bbl while the U.S. Dollar Index is down 0.3% at 101.85.
• Yield Check:
  • 2-yr: -4 bps to 4.79%
  • 3-yr: -5 bps to 4.91%
  • 5-yr: -5 bps to 5.02%
  • 10-yr: -5 bps to 5.26%
  • 30-yr: -3 bps to 5.64%

• News:
  • Australia's Treasurer Chalmers complained that high rates will restrain the budget.
  • A couple European Central Bank policymakers repeated that strong second-round effects of inflation have not been seen.
  • British Prime Minister Burnham is reportedly delaying a decision about potential changes to defense spending.
  • India's September HSBC Services PMI 55.2 (expected 55.8; prior 54.1) and Composite PMI 55.9 (expected 56.5; prior 54.3)
  • Australia's October Westpac Consumer Sentiment -4.7% (prior -5.2%); September ANZ Job Advertisements +2.2% m/m (prior +2.6%)
  • Hong Kong's September S&P Global Manufacturing PMI 49.2 (prior 49.5)
  • Eurozone's August Retail Sales 0.1% m/m (expected 0.2%; prior -0.6%) and 0.8% yr/yr (expected 1.0%; prior 0.4%); September HCOB Construction PMI 43.4 (prior 43.0)
  • Germany's August Factory Orders -10.6% m/m (expected -0.9%; prior 3.2%); September HCOB Construction PMI 43.5 (prior 48.7)
  • France's August Industrial Production -0.3% m/m (expected 0.2%; prior -0.6%) and Government Budget Balance -EUR159.6 bln (prior -EUR145.9 bln); September HCOB Construction PMI 39.8 (prior 37.3)
  • U.K.'s September S&P Global Construction PMI 46.1 (expected 45.0; prior 44.3)
  • Italy's September HCOB Construction PMI 46.5 (prior 41.7)
  • Spain's August Industrial Production 1.5% yr/yr (prior 2.5%)
• Commodities:
  • WTI Crude: -2.5% to $87.22/bbl
  • Gold: +1.1% to $4201.50/ozt
  • Copper: +0.2% to $6.656/lb
• Currencies:
  • EUR/USD: +0.5% to 1.1269
  • GBP/USD: +0.4% to 1.3276
  • USD/CNH: -0.1% to 6.7048
  • USD/JPY: +0.1% to 158.09
• Data out Today:
  • 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