Bond Market Update

Early Gains Challenged

• U.S. Treasuries trade on their lows after backing down from their starting levels. The trading day started with modest gains thanks to some late strength in the futures market just before the cash start. However, the early gains quickly faded after the market received today's sizable batch of data. Overall, the reports pointed to steady growth with a continued increase in durable orders, but there was no relief with respect to inflation, as the PCE Price Index (3.7% year-over-year) and core PCE (3.3% year-over-year) held at levels from June while the second estimate of Q2 GDP showed an upward revision to the PCE Price Index (to 5.3% from 5.1%) and core PCE (to 3.6% from 3.4%). Today's early selling has returned yields on most tenors to their opening levels from Tuesday as the market awaits today's $70 bln 5-yr note sale at 13:00 ET.
• Yield Check:
  • 2-yr: +2 bps to 4.22%
  • 3-yr: +2 bps to 4.28%
  • 5-yr: +3 bps to 4.38%
  • 10-yr: +3 bps to 4.66%
  • 30-yr: +2 bps to 5.19%