Bond Market Update

Pressure Reappears

• U.S. Treasuries are on track for a lower start that is set to lift yields on longer tenors to fresh highs for the year once again. Treasury futures began retreating in early evening action, continuing their slide into the night. There was a brief bounce at the start of the European session, but that move was reversed quickly. The losses in Treasuries have been accompanied by weakness in other sovereign debt, including France's OATs, which have given back their gains from yesterday even though Finance Minister Lescure attempted to allay concerns about the country's fiscal issues. A rising price of oil has also contributed to the overnight selling amid reports of more attacks on ships in the Strait of Hormuz. Crude oil is back above $90/bbl while the U.S. Dollar Index is up 0.5% at 102.36. The market is facing another light data slate today, but the U.S. Treasury will hold a $39 bln 10-yr note reopening this afternoon.
• Yield Check:
  • 2-yr: +2 bps to 4.81%
  • 3-yr: +3 bps to 4.95%
  • 5-yr: +4 bps to 5.07%
  • 10-yr: +6 bps to 5.33%
  • 30-yr: +7 bps to 5.71%

• News:
  • Micron's (MU) labor union in Taiwan authorized a strike.
  • The Reserve Bank of India raised its policy rate to 5.50% from 5.25%, as expected. Cash reserve ratio remained at 3.00%.
  • Bank of Japan Governor Ueda said that fiscal conditions remain accommodative and that rate hikes will continue in response to economic development and inflation trends.
  • Japan will hold an extraordinary Diet session from October 5 to December 12.
  • Japan's August Average Cash Earnings 3.8% yr/yr (expected 3.7%; prior 4.3%) and Overtime Pay 5.2% yr/yr (prior 4.5%); October Reuters Tankan Index 22 (prior 21); August Leading Index 118.0 (expected 118.1; prior 117.7) and Coincident Indicator -1.9% m/m (prior 1.7%).
  • Australia's August Building Approvals -6.1% m/m (expected -6.1%; prior -1.9%) and 10.3% yr/yr (expected 10.3%; prior 10.9%); Private House Approvals 3.7% m/m (expected 3.7%; prior -1.9%).
  • Germany's August Industrial Production 2.0% m/m (expected 0.5%; prior -1.2%) and 2.33% yr/yr (prior -1.74%).
  • France's August Trade Balance -EUR6.1 bln (expected -EUR6.5 bln; prior -EUR6.6 bln) and Current Account -EUR1.5 bln (prior -EUR3.9 bln).
  • U.K.'s September Lloyds House Price Index was unchanged m/m (expected 0.0%; prior -0.3%) and yr/yr (prior -0.4%).
• Commodities:
  • WTI Crude: +0.9% to $90.23/bbl
  • Gold: -1.1% to $4141.50/ozt
  • Copper: +0.1% to $6.654/lb
• Currencies:
  • EUR/USD: -0.7% to 1.1186
  • GBP/USD: -0.5% to 1.3211
  • USD/CNH: +0.1% to 6.7081
  • USD/JPY: +0.1% to 158.20
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -4.2%; prior -6.0%)
  • 10:30 ET: Weekly crude oil inventories (prior +0.92 mln)
  • 14:00 ET: September FOMC Minutes
  • 15:00 ET: August Consumer Credit (Briefing.com consensus $15.2 bln; prior $18.1 bln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results