Bond Market Update

Forging a Rebound

• U.S. Treasuries are on track for a modestly higher start after a night that saw some gains in global sovereign debt after yesterday's weakness. Treasury futures climbed through the Asian session, followed by a pullback after the focus shifted to action in Europe. The currency market saw a rally in the Japanese yen after Treasury Secretary Bessent said yesterday that he knows what Japan is planning on doing. This fueled speculation that he is foreshadowing a rate hike from the Bank of Japan, which was already largely expected by the market. Overnight action saw the release of final August Services PMI readings from major economies. The readings showed a deeper-than-expected contraction in France (48.0; expected 48.4) and Germany (49.7; prior 49.8) while most other economies reported continued growth. The U.S. session will also see the release of August S&P Global U.S. Services PMI (prior 56.8) at 9:45 ET, followed by August ISM Non-Manufacturing Index (Briefing.com consensus 54.1%; prior 54.1%) at 10:00 ET. Crude oil has returned to its July high just below $94/bbl while the U.S. Dollar Index is down 0.4% at 99.21.
• Yield Check:
  • 2-yr: -3 bps to 4.36%
  • 3-yr: -2 bps to 4.43%
  • 5-yr: -2 bps to 4.53%
  • 10-yr: -3 bps to 4.77%
  • 30-yr: -2 bps to 5.25%

• News:
  • China Securities Journal expects the yuan to continue appreciating moderately this year. 
  • The Japanese government is reportedly looking to guide 40% of household assets into equities, investment trusts, and bonds by 2040, up from the current 25%.
  • Germany's Chancellor Merz will meet with ECB officials ahead of next week's policy meeting, which is expected to result in a rate hike.
  • Germany's IfW raised the domestic growth forecast for 2026 to 1.3% from 0.8% while the ifo Institute raised its domestic growth forecast to 1.4% from 0.8%.
  • China's August RatingDog Services PMI hit 51.4 (expected 50.6; last 50.4).
  • Japan's August Services PMI hit 52.5 (expected 52.3; last 51.2). · Hong Kong's August Manufacturing PMI hit 49.5 (last 51.0).
  • Australia's August Services PMI hit 53.2 (expected 52.9; last 53.6). July trade surplus reached AUD1.923 bln (expected surplus of AUD1.400 bln; last surplus of AUD2.341 bln) as imports fell 2.5% m/m (last -0.7%) and exports fell 3.3% m/m (last 9.1%).
  • New Zealand's Q2 Terms of Trade Index was down 9.0% qtr/qtr (expected -2.1%; last -1.9%).
  • India's August Services PMI hit 54.1 (expected 54.5; last 53.3).
  • Eurozone's August Services PMI hit 51.6 (expected 51.7; last 51.7). July PPI was up 1.6% m/m (expected 1.2%; last -0.3%), rising 5.8% yr/yr (last 4.6%).
  • Germany's August Services PMI hit 49.7 (expected 48.5; last 49.8).
  • U.K.'s August Services PMI hit 52.5 (expected 52.8; last 52.1).
  • France's August Services PMI hit 48.0 (expected 48.4; last 49.6).
  • Italy's August Services PMI hit 55.2 (expected 53.6; last 52.5).
  • Spain's August Services PMI hit 57.8 (expected 59.0; last 58.3).
  • Swiss Q2 GDP expanded 1.9% qtr/qtr (expected 1.5%; last 0.6%), growing 2.8% yr/yr (last 0.5%). August CPI was up 0.4% m/m (expected 0.0%; last -0.1%), rising 0.8% yr/yr (expected 0.5%: last 0.4%).
• Commodities:
  • WTI Crude: +1.8% to $92.63/bbl
  • Gold: +1.5% to $4482.30/ozt
  • Copper: +0.5% to $6.63/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1613
  • GBP/USD: +0.1% to 1.3492
  • USD/CNH: UNCH at 6.7184
  • USD/JPY: -1.6% to 156.14
• Data out Today:
  • 8:30 ET: July Trade Balance (Briefing.com consensus -$89.6 bln; prior -$73.3 bln), revised Q2 Productivity (Briefing.com consensus 1.4%; prior 1.4%), revised Q2 Unit Labor Costs (Briefing.com consensus 1.3%; prior 1.3%), weekly Initial Claims (Briefing.com consensus 205,000; prior 203,000), and Continuing Claims (prior 1.778 mln)
  • 9:45 ET: Final August S&P Global U.S. Services PMI (prior 56.8)
  • 10:00 ET: August ISM Non-Manufacturing Index (Briefing.com consensus 54.1%; prior 54.1%)
  • 10:30 ET: Weekly natural gas inventories (prior +15 bcf)