Bond Market Update

Lower Start Ahead

• U.S. Treasuries are on track for a slightly lower start with longer tenors expected to show early relative weakness after a couple days of losses. Like yesterday's cash session, the overnight retreat was confined to a narrow range while other sovereign debt showed more movement. JGBs faced some pressure, due in part to a weak 2-yr JGB auction, while European debt has also been on the defensive after France's Q2 GDP was revised down to reflect a standstill while inflation remained high. Elsewhere, Spain saw slightly hotter-than-expected inflation in August. Today's domestic data slate will be limited to the 9:45 ET release of the Chicago PMI for August (Briefing.com consensus 57.0; prior 57.6), followed by the final University of Michigan Consumer Sentiment survey for August (Briefing.com consensus 51.0; prior 51.0) at 10:00 ET. However, the main event will be Fed Chairman Warsh's speech from the Jackson Hole Economic Symposium. This will be Mr. Warsh's first major address outside of FOMC press conferences. Crude oil holds a modest loss while the U.S. Dollar Index is flat at 99.18.
• Yield Check:
  • 2-yr: UNCH at 4.23%
  • 3-yr: UNCH at 4.30%
  • 5-yr: +1 bp to 4.41%
  • 10-yr: +2 bps to 4.69%
  • 30-yr: +2 bps to 5.21%

• News:
  • Standard & Poor's affirmed China's A+ sovereign rating with a Stable outlook.
  • Japan's Prime Minister Takaichi confirmed plans to make changes to her cabinet in the second half of September.
  • French Finance Minister Lescure said that the economy suffered greatly after the summer heatwave, adding that data for Q3 will also be impacted.
  • Japan's August Tokyo CPI was up 1.9% yr/yr (last 1.8%) and Tokyo Core CPI was up 1.8%, as expected (last 1.7%). July jobs/applications ratio remained at 1.18 (expected 1.19) and July Unemployment Rate fell to 2.4% from 2.5% (expected 2.5%).
  • India's July Industrial Production was up 6.7% yr/yr (expected 6.0%; last 8.8%) and Manufacturing Output was up 7.3% m/m (last 9.5%). 
  • Eurozone's August Business and Consumer Survey rose to 98.4 from 97.1 (expected 97.5).
  • Germany's July Import Price Index was up 0.2% m/m (expected 0.3%; last -0.7%), rising 6.8% yr/yr (last 6.1%). August Unemployment increased by 4,000, as expected (last 6,000) and Unemployment Rate remained at 6.4%, as expected.
  • France's Q2 GDP was unchanged qtr/qtr (expected 0.2%; last -0.2%), growing 0.5% yr/yr (expected 0.7%; last 0.9%). August CPI was up 0.7% m/m, as expected (last 0.6%), rising 2.4% yr/yr (last 2.1%). July Consumer Spending was up 0.5% m/m (expected 0.1%; last 0.6%). Q2 nonfarm payrolls were down 0.1% qtr/qtr (last -0.1%).
  • Italy's June Industrial Sales were down 1.0% m/m (last 0.5%), but up 3.1% yr/yr (last 5.2%). August Business Confidence rose to 89.9 from 89.7 (expected 90.0) and Consumer Confidence rose to 94.5 from 94.2 (expected 95.0).
  • Spain's August CPI was up 0.7% m/m (expected 0.6%; last 0.3%), rising 4.3% yr/yr (expected 4.2%; last 3.6%). August Core CPI was up 2.9% yr/yr (last 3.0%). July Retail Sales fell 0.3% yr/yr (last 0.6%).
  • Swiss August KOF Leading Indicators rose to 106.7 from 104.2 (expected 103.0).
• Commodities:
  • WTI Crude: -0.6% to $83.07/bbl
  • Gold: -0.4% to $4646.00/ozt
  • Copper: +0.7% to $5.638/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1645
  • GBP/USD: UNCH at 1.3585
  • USD/CNH: +0.1% to 6.7219
  • USD/JPY: +0.2% to 159.67
• Data out Today:
  • 9:45 ET: August Chicago PMI (Briefing.com consensus 57.0; prior 57.6)
  • 10:00 ET: Final August University of Michigan Consumer Sentiment (Briefing.com consensus 51.0; prior 51.0)