Bond Market Update

Long Bond Behind Again

• U.S. Treasuries are on track for a slightly higher start after a quiet night, though the long bond is set to show some early weakness. Treasury futures spent the early portion of the night in a razor-thin range, making a brief push to highs after the start of the European session. However, the past couple hours have seen a return to levels from early evening. Like Treasuries, most other sovereign debt saw little movement while longer-dated JGBs faced some pressure. The overnight session brought the release of flash August PMI readings from major economies with Japan's flash Manufacturing PMI for August (55.1) expanding for the eighth month in a row while the reading for the eurozone (52.8; expected 51.8) beat expectations, hitting its highest level in more than four years. In other data, U.K.'s Retail Sales (-0.5%; expected -0.4%) were below expectations while the U.S. session will only see the release of flash S&P Global U.S. Manufacturing PMI (prior 53.9) and flash S&P Global U.S. Services PMI (prior 54.6) at 9:45 ET. Crude oil hovers near $87/bbl while the U.S. Dollar Index is down 0.2% at 98.68.
• Yield Check:
  • 2-yr: -1 bp to 4.18%
  • 3-yr: -1 bp to 4.26%
  • 5-yr: -1 bp to 4.38%
  • 10-yr: -1 bp to 4.69%
  • 30-yr: +1 bp to 5.25%

• News:
  • Japan's Prime Minister Takaichi is planning to make some changes to her cabinet in the second half of September.
  • South Korea's exports through the first 20 days of August were up 56% yr/yr with chip exports almost tripling.
  • South Korea's finance ministry said that it is keeping a close watch on rising global bond yields.
  • China will expand its joint military exercises with Indonesia.
  • China is reportedly planning another round of economic discussions with Canada.
  • The latest consumer expectations survey for the eurozone showed a dip in year-ahead CPI expectations to 2.9% from 3.0% while the three-year outlook eased to 2.7% from 2.8%.
  • European Central Bank policymaker Kazaks reiterated that the ECB's September decision will be guided by data.
  • The French government is reportedly looking to renew a tax on large corporate profits that brought in about EUR7.5 bln of revenue in 2025.
  • China's July FDI was down 6.2% YTD (last -5.0%).
  • Japan's July National CPI was up 0.4% m/m (last 0.3%), rising 1.9% yr/yr (last 1.6%). July National Core CPI was up 1.8% yr/yr, as expected (last 1.6%). Flash August Manufacturing PMI hit 55.1, as expected (last 54.5) and flash August Services PMI hit 52.3 (last 51.2).
  • South Korea's July PPI was down 0.4% m/m (last 0.0%) but up 7.7% yr/yr (last 8.5%).
  • Australia's flash August Manufacturing PMI hit 52.0 (last 52.0) and flash Services PMI hit 52.9 (last 53.6).
  • New Zealand's July trade deficit reached NZD1.949 bln (expected deficit of NZD175 mln; prior deficit of NZD237 mln). July Credit Card Spending was up 5.3% yr/yr (last 3.2%).
  • India's flash August Manufacturing PMI hit 52.9 (expected 54.0; last 53.5) and flash Services PMI hit 54.5 (expected 53.8; last 53.3).
  • Eurozone's flash August Manufacturing PMI hit 52.8 (expected 51.8; last 51.9) and flash Services PMI hit 51.7 (expected 51.5; last 51.7).
  • Germany's flash August Manufacturing PMI hit 54.1 (expected 52.1; last 52.2) and flash Services PMI hit 48.5 (expected 50.1; last 49.8).
  • U.K.'s July Retail Sales were down 0.5% m/m (expected -0.4%; last 0.7%) but up 1.6% yr/yr (expected 2.2%; last 3.8%). July Core Retail Sales were down 0.9% m/m (expected -0.5%; last 0.9%) but up 2.3% yr/yr (expected 3.3%; last 5.0%). August flash Manufacturing PMI hit 51.5 (expected 51.6; last 51.9) and flash Services PMI hit 52.8 (expected 51.8; last 52.1).
  • France's flash August Manufacturing PMI hit 51.5 (expected 50.1; last 49.8) and flash Services PMI hit 48.4 (expected 49.4; last 49.6). August Business Survey rose to 103 from 101 (expected 101).
• Commodities:
  • WTI Crude: -0.3% to $86.61/bbl
  • Gold: +1.9% to $4657.00/ozt
  • Copper: +2.3% to $6.614/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1702
  • GBP/USD: +0.2% to 1.3658
  • USD/CNH: -0.1% to 6.7195
  • USD/JPY: -0.2% to 158.66
• Data out Today:
  • 9:45 ET: Flash S&P Global U.S. Manufacturing PMI (prior 53.9) and flash S&P Global U.S. Services PMI (prior 54.6)