Bond Market Update

 Bucking The Trend

• U.S. Treasuries are on track for a modestly higher start after a night that saw weakness in most other sovereign debt. Treasury futures spent the night in a sideways range at their lowest levels of the year while overall weakness in bond markets drove all JGB yields and 10-yr yields in Germany, France, and the U.K. to fresh highs for the year. The selling took place despite a steady price of oil around $90/bbl, followed by some recent pressure. The G20 meeting of finance ministers and central bankers in North Carolina ended without a joint statement after China did not support parts of the statement pertaining to shipping in the Strait of Hormuz, non-market policies, and external surpluses. On that note, Treasury Secretary Bessent said that China continues to flood the world with cheap exports due to industrial overcapacity. The overnight data flow was on the light side after the customary torrent of news at the start of the month. The U.S. session will see the release of the August ADP Employment Change report (Briefing.com consensus 47,000; prior 44,000) at 8:15 ET, followed by July Factory Orders (Briefing.com consensus 0.6%; prior -0.3%) at 10:00 ET. Crude oil approached its July high (93.50) before reversing while the U.S. Dollar Index is up 0.1% at 99.77.
• Yield Check:
  • 2-yr: -1 bp to 4.38%
  • 3-yr: -1 bp to 4.45%
  • 5-yr: -2 bps to 4.54%
  • 10-yr: -2 bps to 4.78%
  • 30-yr: -2 bps to 5.25%

• News:
  • The Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 2.75%, as expected.
  • South Korea and Japan will deepen their cooperation on energy, critical minerals, and carbon rules.
  • European Central Bank policymaker Nagel acknowledged that the market is all but certain about a rate hike later this month.
  • South Korea's August CPI was up 0.2% m/m (expected 0.3%; last -0.2%), rising 3.1% yr/yr (expected 3.2%; last 2.8%).
  • Australia's Q2 GDP was up 0.4% qtr/qtr (expected 0.3%; last 0.3%), rising 2.1% yr/yr (expected 1.8%; last 2.5%). August AIG Construction Index rose to -6.9 from -40.8 and AIG Manufacturing Index rose to -16.6 from -19.3.
  • New Zealand's July Building Consents were down 4.3% m/m (last -3.7%).
  • France's July budget deficit reached EUR145.9 bln (last deficit of EUR106.8 bln).
  • Italy's July PPI was up 2.4% m/m (last 0.0%), rising 7.8% yr/yr (last 5.8%).
  • Spain's August Unemployment increased by 44,400 (expected 15,400; last 19,500).
• Commodities:
  • WTI Crude: -0.8% to $89.50/bbl
  • Gold: -0.5% to $4372.70/ozt
  • Copper: +0.1% to $6.61/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1578
  • GBP/USD: -0.2% to 1.3485
  • USD/CNH: UNCH at 6.7213
  • USD/JPY: -0.3% to 159.62
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 0.8%; prior -1.0%)
  • 8:15 ET: August ADP Employment Change (Briefing.com consensus 47,000; prior 44,000)
  • 10:00 ET: July Factory Orders (Briefing.com consensus 0.6%; prior -0.3%)
  • 10:30 ET: Weekly crude oil inventories (prior +4.41 mln)
  • 14:00 ET: September Fed Beige Book