Bond Market Update

Weak Finish to August

• U.S. Treasuries ended August with losses in most tenors, producing fresh 2026 highs in yields on 3s, 5s, 7s, and 10s. Treasuries started the day near their flat lines before quickly sliding to lows after an overnight rise in the price of oil. The 2-yr note outperformed from the start, keeping its yield just below its July high (4.370%) while most other yields could not avoid hitting new 2026 highs. Investors did not receive any economic data today, but the rest of the week will bring some noteworthy reports, starting with the August ISM Manufacturing Index (Briefing.com consensus 55.3%; prior 55.6%) tomorrow at 10:00 ET. Treasury Secretary Bessent and Fed Chairman Warsh took part in a G20 meeting of finance ministers and central bankers, but they did not offer any surprising remarks. The meeting will continue tomorrow. Most of today's selling, which lifted the 10-yr yield toward its peak from 2025 (4.809%) was done by mid-morning, leaving Treasury prices on lows and yields on highs into the close. Crude oil gained just over $1/bbl for the month while the U.S. Dollar Index fell 0.3% to 99.41 today, shedding 0.4% in August.
• Yield Check:
  • 2-yr: UNCH at 4.35% (+6 bps in August)
  • 3-yr: +1 bp to 4.41% (+5 bps in August)
  • 5-yr: +3 bps to 4.51% (+5 bps in August)
  • 10-yr: +4 bps to 4.76% (+1 bp in August)
  • 30-yr: +4 bps to 5.25% (-3 bps in August)

• News:
  • The approval rating of Japan Prime Minister Takaichi's cabinet remained at 53%, according to the latest poll from Asahi.
  • India and Brazil are looking to increase their bilateral trade to $30 bln by 20230.
  • The Reserve Bank of New Zealand will release its latest policy Statement on Wednesday, which could call for a rate hike.
  • China's August Manufacturing PMI hit 49.8 (expected 49.5; last 49.2) and Non-Manufacturing PMI hit 49.0 (expected 49.5; last 49.0).
  • Japan's July Retail Sales rose 4.0% yr/yr (expected 3.2%; last 0.6%). July Housing Starts were up 8.2% yr/yr (expected 7.2%; last 18.6%) and Construction Orders fell 13.4% yr/yr (last 2.3%).
  • South Korea's July Retail Sales were down 2.4% m/m (last 2.7%) and July Service Sector Output was down 1.3% m/m (last 0.7%). July Industrial Production was up 0.2% m/m (last 6.7%), rising 3.6% yr/yr (last 6.0%).
  • Hong Kong's July Retail Sales rose 4.5% yr/yr (last 4.6%).
  • Australia's Q2 Company Gross Operating Profits rose 1.8% qtr/qtr (expected 2.0%: last -1.5%) and Pre-tax Profits were up 12.5% qtr/qtr (last -4.1%). July Private Sector Credit rose 0.6% m/m (expected 0.7%; last 0.8%) and Housing Credit was up 0.5% m/m (last 0.6%). August MI Inflation Gauge was up 0.5% m/m (last 1.0%).
  • New Zealand's August ANZ Business Confidence hit 53.7 (last 56.1). · India's Q1 GDP expanded 7.8% yr/yr (expected 7.1%; last 7.8%).
  • Germany's August CPI was up 0.2% m/m (expected 0.3%; last 0.8%), rising 2.9% yr/yr (expected 3.0%; last 2.8%).
  • Spain's June Current Account surplus reached EUR2.41 bln (last surplus of EUR1.84 bln).
• Commodities:
  • WTI crude: +2.9% to $85.83/bbl
  • Gold: -1.1% to $4479.80/ozt
  • Copper: +0.5% to $6.69/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1616
  • GBP/USD: +0.1% to 1.3548
  • USD/CNH: -0.1% to 6.7186
  • USD/JPY: -0.2% to 159.78
• The Day Ahead:
  • 9:45 ET: Final August S&P Global U.S. Manufacturing PMI (prior 53.2)
  • 10:00 ET: July Job Openings (Briefing.com consensus 7.390 mln; prior 7.359 mln), July Construction Spending (Briefing.com consensus 0.2%; prior -0.1%), and August ISM Manufacturing Index (Briefing.com consensus 55.3%; prior 55.6%)