Bond Market Update

Weekly Gains Secured Despite Friday Pressure

• U.S. Treasuries finished the week on a mostly lower note, though even with Friday's losses, the entire complex secured a higher finish for a week that saw the setting of fresh 2026 highs in yields on 10s, 20s, and 30s. The Friday session started with losses across the curve, followed by some more pressure during the first two hours of action, but the long bond outperformed from the start, and eventually paced a rebound that lifted it into positive territory while shorter tenors recovered a smaller portion of their morning losses. This was the third day in a row that saw a recovery from early selling with the 30-yr bond offering leadership to a market that has been eagerly awaiting a pause in the rise of global yields. The market received some encouragement about demand for longer tenors from good 10- and 30-yr auctions on Wednesday and Thursday, with the attention now turning toward the release of September CPI (Briefing.com consensus 0.6%; prior 0.4%) and Core CPI (Briefing.com consensus 0.2%; prior 0.3%) next Wednesday, followed by September PPI (Briefing.com consensus 0.5%; prior 0.4%) and Core PPI (Briefing.com consensus 0.3%; prior 0.2%) on Thursday. On Monday, however, the Treasury market will be closed in observance on Columbus Day while the New York Stock Exchange will be open for a regular session. Crude oil added just under $1/bbl for the week while the U.S. Dollar Index climbed 0.1% to 102.21 today, extending this week's gain to 0.3%.
• Yield Check:
  • 2-yr: +3 bps to 4.79% (-3 bps this week)
  • 3-yr: +4 bps to 4.93% (-3 bps this week)
  • 5-yr: +3 bps to 5.02% (-4 bps this week)
  • 10-yr: +1 bp to 5.24% (-4 bps this week)
  • 30-yr: -1 bp to 5.60% (-3 bps this week)

• News:
  • The USDA raised its October crop output forecast for corn and cotton. 
  • The U.S. Treasury approved Russia's planned sale of diesel fuel to customers in the U.S. and in the global marketplace.
  • Japan's cabinet approved a bill that will lower the food consumption tax.
  • Japan's Finance Minister Katayama said that spending will be reviewed with a focus on public funds and subsidies.
  • The People's Bank of China released a statement, claiming there are no plans to devalue the yuan for trade advantages.
  • China claimed that it will reduce exports of hybrid vehicles to Europe.
  • China approved fuel export plans for October and established an import quota for 2027.
  • ECB Minutes from the September meeting showed unanimous agreement to increase the interest rate corridor by 25-basis points.
  • Japan's August Household Spending -3.1% yr/yr (expected -3.5%; prior -3.6%) and 0.1% m/m (expected 0.5%; prior 0.5%); September Machine Tool Orders 60.4% yr/yr (prior 64.7%).
  • Italy's August Industrial Production -1.3% m/m (expected 0.0%; prior 0.6%) and 0.0% yr/yr (prior -0.1%).
  • Switzerland's September SECO Consumer Climate -36 (expected -32; prior -33).
• Today's Data:
  • The preliminary reading for the University of Michigan Consumer Sentiment Index for October decreased to 46.3 (Briefing.com consensus: 48.1) from the final reading of 48.1 for September. In the same period a year ago, the index stood at 53.6.
    • The key takeaway from the report is that consumer sentiment continues to deteriorate as the frustrations with the higher cost-of-living increase.
• Commodities:
  • WTI crude: +0.5% to $91.92/bbl
  • Gold: +1.5% to $4216.20/ozt
  • Copper: +1.8% to $6.69/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1203
  • GBP/USD: +0.1% to 1.3242
  • USD/CNH: -0.1% to 6.6929
  • USD/JPY: +0.3% to 158.23
• The Week Ahead:
  • Monday: Bond market closed for Columbus Day; NYSE open
  • Tuesday: September NFIB Small Business Optimism (Briefing.com consensus 98.0; prior 98.7) at 6:00 ET; September Existing Home Sales (Briefing.com consensus 3.96 mln; prior 3.98 mln) at 10:00 ET; and September Treasury Budget (prior -$166.8 bln) at 14:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -4.2%) at 7:00 ET; September CPI (Briefing.com consensus 0.6%; prior 0.4%) and Core CPI (Briefing.com consensus 0.2%; prior 0.3%) at 8:30 ET; and October Beige Book at 14:00 ET
  • Thursday: September PPI (Briefing.com consensus 0.5%; prior 0.4%), Core PPI (Briefing.com consensus 0.3%; prior 0.2%), September Retail Sales (Briefing.com consensus 0.3%; prior 1.2%), Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 1.4%), weekly Initial Claims (Briefing.com consensus 200,000; prior 197,000), Continuing Claims (prior 1.716 mln), October Empire State Manufacturing (Briefing.com consensus 7.0; prior 7.6), and October Philadelphia Fed (Briefing.com consensus 29.0; prior 37.8) at 8:30 ET; August Business Inventories (Briefing.com consensus 0.4%; prior 0.8%) at 10:00 ET; weekly natural gas inventories (prior +85 bcf) at 10:30 ET; and weekly crude oil inventories (prior -3.186 mln) at 12:00 ET
  • Friday: September Import Prices (prior 0.7%), Import Prices ex-oil (prior 0.8%), Export Prices (prior 0.6%), and Export Prices ex-agriculture (prior 0.7%) at 8:30 ET; September Industrial Production (Briefing.com consensus 0.4%; prior 0.0%) and Capacity Utilization (Briefing.com consensus 76.5%; prior 76.3%) at 9:15 ET; and August Net Long-Term TIC Flows (prior -$27.9 bln) at 16:00 ET