Bond Market Update

Short End Slipping Ahead of CPI

• U.S. Treasuries are on track for a slightly lower start in shorter tenors ahead of the 8:30 ET release of August CPI (Briefing.com consensus 0.4%; prior 0.1%) and Core CPI (Briefing.com consensus 0.2%; prior 0.2%). Overnight trade saw a dip to fresh lows in Treasury futures near the end of the Asian session, followed by a bounce that helped longer tenors return to little changed while other sovereign debt has faced some pressure. Crude oil has pulled back from this week's rally, slipping back below $100/bbl. The overnight news flow was on the lighter side, but there was speculation that the Bank of Japan could accelerate the pace of its rate hikes and that the European Central Bank could hike again in October. The U.S. Dollar Index is up 0.1% at 99.14.
• Yield Check:
  • 2-yr: +2 bps to 4.57%
  • 3-yr: +2 bps to 4.67%
  • 5-yr: +1 bp to 4.74%
  • 10-yr: +1 bp to 4.95%
  • 30-yr: UNCH at 5.36%

• News:
  • China released a five-year plan for developing intelligent connected new energy vehicles.
  • South China Morning Post reported that foreign automakers are slashing prices of gas-powered vehicles in China.
  • South Korea's exports for the first ten days of September were up 82.6% with chip exports soaring 270.1%.
  • Several European Central Bank policymakers commented about inflation remaining too high, prompting speculation about another rate hike in October.
  • France's finance ministry lowered its domestic growth forecast for the year to 0.5% from 0.7%. 
  • Towns in England led by mayors from the Labour party are reportedly planning a 5% tourist tax.
  • Japan's August PPI was down 0.2% m/m (expected 0.0%; last 0.4%) but up 7.6% yr/yr (expected 7.4%; last 7.7%). Q3 BSI Large Manufacturing Conditions rose to 7.6 from -1.8 (expected 2.5).
  • New Zealand's August Business PMI hit 53.1 (last 54.3).
  • U.K.'s July GDP expanded 0.4% m/m (expected 0.0%: last 0.3%), growing 1.6% yr/yr (expected 1.2%; last 1.1%). July trade deficit reached GBP20.97 bln (expected deficit of GBP22.60 bln; last deficit of GBP23.01 bln). July Industrial Production was up 0.2% m/m (expected -0.2%; last -0.2%), rising 0.6% yr/yr (expected 0.2%; last -0.2%). July Manufacturing Production was up 0.9% m/m (expected 0.2%; last -0.5%), rising 2.6% yr/yr (expected 2.0%; last 0.5%). July Construction Output was up 0.1% m/m, as expected (last 0.1%) but down 2.5% yr/yr (expected -2.3%; last -2.3%).
  • Italy's Q2 Unemployment Rate rose to 5.6% from 5.3% (expected 5.4%).
  • Swiss August SECO Consumer Climate remained at -33, as expected.
• Commodities:
  • WTI Crude: -3.3% to $99.10/bbl
  • Gold: -0.7% to $4377.60/ozt
  • Copper: -0.2% to $6.535/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1592 
  • GBP/USD: UNCH at 1.3504
  • USD/CNH: UNCH at 6.7093
  • USD/JPY: -0.3% to 153.99
• Data out Today:
  • 8:30 ET: August CPI (Briefing.com consensus 0.4%; prior 0.1%) and Core CPI (Briefing.com consensus 0.2%; prior 0.2%)
  • 10:00 ET: Preliminary September University of Michigan Consumer Sentiment (Briefing.com consensus 51.5; prior 51.7)
  • 14:00 ET: August Treasury Budget (Briefing.com consensus -$485.0 bln; prior -$432.3 bln)