Bond Market Update

 Long End Behind

• U.S. Treasuries are on track for a lower start in longer tenors while the short end is expected to show some early relative strength. Treasury futures began slipping in early evening action, continuing their retreat into the night alongside other sovereign debt. Another increase in the price of oil has contributed to the selling after reports of cargo ships being attacked in the Strait of Hormuz. Investors received a big batch of data to begin the month with China's RatingDog Manufacturing PMI (51.5) for August showing continued growth, bucking the trend seen in official PMI readings. Meanwhile, eurozone's Manufacturing PMI for August (52.7) showed stronger than expected growth, thanks in large part to an-above consensus reading from Germany (54.3; expected 54.1). In news, an NHK report that Treasury Secretary Bessent told top Japanese officials that more rate hikes are needed received some attention. However, the market was already expecting a September rate hike before this report. Crude oil has climbed toward $88/bbl while the U.S. Dollar Index is up 0.2% at 99.61.
• Yield Check:
  • 2-yr: UNCH at 4.35%
  • 3-yr: +1 bp to 4.42%
  • 5-yr: +1 bp to 4.52%
  • 10-yr: +2 bps to 4.78%
  • 30-yr: +2 bps to 5.27%

• News:
  • Japan will spend JPY616 bln to extend fuel subsidies.
  • European Central Bank policymaker Rehn said that the conflict in Iran could keep inflation elevated and that the ECB can't show complacency.
  • British Prime Minister Burnham is expected to announce measures to reduce the cost of living later today.
  • China's August RatingDog Manufacturing hit PMI 51.5 (expected 51.0; last 50.9).
  • Japan's Q2 Capital Spending was up 1.6% yr/yr (expected -0.2%; last 0.0%) and August Manufacturing PMI hit 54.9 (expected 55.1; last 54.5). August Household Confidence rose to 35.5 from 34.9 (expected 35.3).
  • South Korea's August trade surplus reached $34.75 bln (expected surplus of $30.70 bln; last surplus of $30.39 bln) as imports grew 22.5% yr/yr (expected 24.7%; last 26.5%) and exports jumped 68.7% (expected 62.6%; last 63.0%). August Manufacturing PMI hit 52.3 (last 53.1).
  • Australia's August Manufacturing PMI hit 52.0, as expected (last 52.0). Q2 Current Account deficit reached AUD27.2 bln (expected deficit of AUD29.7 bln; last deficit of AUD25.4 bln). July Building Approvals were down 3.6% m/m (expected -4.7%; last 6.9%) and Private House Approvals were down 4.2% m/m (last 0.4%).
  • India's August Manufacturing PMI hit 52.8 (expected 52.9; last 53.5).
  • Eurozone's August Manufacturing PMI hit 52.7 (expected 52.8; last 51.9). Flash August CPI was up 2.9% m/m (last 0.2%), rising 3.3% yr/yr, as expected (last 2.9%). Flash August Core CPI was up 0.2% m/m (last 0.0%), rising 2.4% yr/yr (expected 2.5%; last 2.5%). July Unemployment Rate remained at 6.4% (expected 6.3%).
  • Germany's July Retail Sales were down 3.4% m/m (expected 0.4%; last 0.0%), falling 2.5% yr/yr (last 5.3%). August Manufacturing PMI hit 54.3 (expected 54.1; last 52.2).
  • U.K.'s August Nationwide HPI was up 0.2% m/m (expected 0.1%; last -0.1%), rising 1.6% yr/yr (expected 2.1%; last 1.4%). August Manufacturing PMI hit 51.7 (expected 51.5; last 51.9). July Net Lending to Individuals reached GBP6.30 bln (expected GBP7.20 bln; last GBP9.50 bln) and July Mortgage Approvals hit 56,050 (expected 59,000; last 58,220).
  • France's August Manufacturing PMI hit 51.1 (expected 51.5; last 49.8).
  • Italy's August Manufacturing PMI hit 49.6 (expected 51.4; last 51.3). Q2 GDP expanded 0.2% qtr/qtr, as expected (last 0.2%), growing 1.0% yr/yr, as expected (last 0.8%). July Unemployment Rate remained at 5.8% (expected 5.6%; last 5.8%). Flash August CPI was up 0.5% m/m, as expected (last 0.3%), rising 3.3% yr/yr (last 2.9%).
  • Spain's August Manufacturing PMI hit 49.5 (expected 50.3; last 50.2).
  • Swiss July Retail Sales were up 2.3% yr/yr (expected 1.6%; last 1.9%). August Manufacturing PMI hit 57.1 (expected 54.1; last 53.2).
• Commodities:
  • WTI Crude: +2.0% to $87.51/bbl
  • Gold: -1.1% to $4431.60/ozt
  • Copper: -1.4% to $6.598/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1595
  • GBP/USD: -0.1% to 1.3536
  • USD/CNH: +0.1% to 6.7233
  • USD/JPY: +0.2% to 160.07
• Data out Today:
  • 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%)