Bond Market Update

Steady After Quiet Night

• U.S. Treasuries are on track for a slightly higher start in longer tenors after a quiet night. Treasury futures spent the overnight session in a narrow sideways range amid significantly reduced overall volume due to Labor Day closures in most major markets. Markets in Japan and the U.K. remained open while U.S. Treasuries and equities will also be open for a regular session. Economic data released overnight showed a surprising deceleration in Japan's Tokyo Core CPI for April (to 1.5% from 1.7%; expected 1.8%) while South Korea reported another big jump in exports for April. Investors will receive a few domestic economic reports this morning with the final reading of the S&P Global U.S. Manufacturing PMI for April (prior 54.0) set for a 9:45 ET release, followed by the April ISM Manufacturing Index (Briefing.com consensus 53.1%; prior 52.7%) at 10:00 ET. Crude oil is back below $105/bbl while the U.S. Dollar Index is down 0.1% at 97.97.
• Yield Check:
  • 2-yr: UNCH at 3.88%
  • 3-yr: UNCH at 3.91%
  • 5-yr: UNCH at 4.02%
  • 10-yr: -1 bp to 4.38%
  • 30-yr: -1 bp to 4.98%

• News:
  • A bipartisan congressional delegation will visit China this weekend ahead of President Trump's planned trip to Beijing later this month.
  • Taiwan's Q1 GDP grew 13.7%, a pace not seen since 1987.
  • Japanese shipper Mitsui expects that traffic through the Strait of Hormuz will normalize in the next couple months.
  • Expectations for up to two rate hikes from the European Central Bank are solidifying while the Bank of England is seen as likely to announce a rate hike by July, followed by another one in September.
  • Japan's April Tokyo CPI was up 1.5% yr/yr (last 1.4%) and Tokyo Core CPI was also up 1.5% yr/yr (expected 1.8%; last 1.7%). April Manufacturing PMI hit 55.1 (expected 54.9; last 51.6).
  • South Korea's April trade surplus reached $23.77 bln (expected surplus of $23.00 bln; last surplus of $26.24 bln) as imports jumped 16.7% yr/yr (expected 14.5%; last 13.2%) and exports soared 48.0% yr/yr (expected 45.3%; last 49.2%).
  • Australia's April Manufacturing PMI hit 51.3 (expected 51.0; last 49.8). Q1 PPI was up 0.4% qtr/qtr (expected 0.9%; last 0.8%), rising 3.0% yr/yr (last 3.5%). April Commodity Prices rose 15.7% yr/yr (last 12.7%).
  • New Zealand's March Building Consents were down 1.3% m/m (last 2.8%).
  • U.K.'s April Nationwide HPI was up 0.4% m/m (expected -0.3%; last 0.9%), rising 3.0% yr/yr (expected 2.2%; last 2.2%). April Manufacturing hit PMI 53.7 (expected 53.6; last 51.0). March Mortgage Lending reached GBP6.15 bln (expected GBP4.20 bln; last GBP5.22 bln) and March Net Lending to Individuals reached GBP8.000 bln (expected GBP5.900 bln; last GBP6.800 bln).
  • Swiss March Retail Sales rose 0.5% yr/yr (expected 0.6%; last 0.4%).
• Commodities:
  • WTI Crude: -0.9% to $104.10/bbl
  • Gold: -1.0% to $4584.20/ozt
  • Copper: -0.1% to $5.972/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1751
  • GBP/USD: +0.1% to 1.3620
  • USD/CNH: UNCH at 6.8331
  • USD/JPY: UNCH at 156.58
• Data out Today:
  • 9:45 ET: Final April S&P Global U.S. Manufacturing PMI (prior 54.0)
  • 10:00 ET: April ISM Manufacturing Index (Briefing.com consensus 53.1%; prior 52.7%)