Bond Market Update

Time to See PCE

• U.S. Treasuries moved gingerly through the overnight trade after an eventful session on Tuesday that saw the market dislocate its trading from the movement in oil prices. That continues to ring true this morning, only this time oil prices are higher (WTI +1.5% to $90.70/bbl) and Treasury yields are lower. The improvement in Treasuries is mirroring an improvement in expectations for when the Fed might next raise the target range for the fed funds rate. Currently, the probability of a 25-basis-point hike at the October FOMC meeting sits at 43.7%, down markedly from 70.9% seen only a week ago. That shift was preciptated by New York Fed President Williams (FOMC voter), who said yesterday that there is no urgency for the Fed to act after the September rate hike. We'll see soon enough if the market continues to believe that. The PCE Price Index and Core PCE Price Index for August will be released at 8:30 a.m. ET, along with a host of other data points.
• Yield Check:
  • 2-yr: -2 bps to 4.87%
  • 3-yr: -3 bps to 4.96%
  • 5-yr: -2 bps to 5.04%
  • 10-yr: -3 bps to 5.23%
  • 30-yr: -3 bps to 5.56%

• News:
  • U.S. and Iran talks yielded little progress. Axios
  • Technology executives signed a constitution on artificial intelligence during a White House event. Politico
  • President Trump evaluating all options for diesel exports. FT
  • OPEC will likely keep targets unchanged at Sunday's meeting. Reuters
  • President Trump to unveil South Korea's $200 bln U.S. investment plan, including $54 bln for Alaska LNG, according to Bloomberg
  • Paramount Skydance (PSKY) bond deal draws over $109 bln in orders to help fund Warner Bros. acquisition, according to Bloomberg
  • MBA Mortgage Applications Index -6.0% wk/wk, with refinance applications down 9% and purchase applications down 4%
  • China's September Manufacturing PMI 50.1 (expected 50.1; prior 49.8), Non-Manufacturing PMI 50.2 (expected 49.2; prior 49.0), and Composite PMI 50.7 (prior 49.5)
  • U.K.'s Q2 GDP 0.5% qtr/qtr (expected 0.4%; prior 0.6%) and 1.4% yr/yr (expected 1.2%; prior 0.9%)
• Commodities:
  • WTI crude: +1.5% to $90.70/bbl
  • Gold: +0.7% to $4,208.80/ozt
  • Copper: +0.2% to $6.61/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1354
  • GBP/USD: +0.5% to 1.3290
  • USD/CNH: flat at 6.7071
  • USD/JPY: -0.2% to 157.03
• The Day Ahead:
  • 07:00 ET: MBA Mortgage Applications Index (prior -1.5%)
  • 08:15 ET: September ADP Employment Change (Briefing.com consensus: 58K; prior 38K)
  • 08:30 ET: August Personal Income (Briefing.com consensus: 0.4%; prior 0.4%), Personal Spending (Briefing.com consensus: 0.7%; prior 0.2%), PCE Price Index (Briefing.com consensus: 0.4%; prior 0.2%), and Core PCE Price Index (Briefing.com consensus: 0.3%; prior 0.2%)
  • 08:30 ET: Q2 GDP - Third Estimate (Briefing.com consensus: 1.5%; prior 1.5%) and Q2 GDP Deflator - Third Estimate (Briefing.com consensus: 6.3%; prior 6.4%)
  • 08:30 ET: August Adv. Intl. Trade in Goods (prior -$118.8B), Adv. Retail Inventories (prior 0.7%), and Adv. Wholesale Inventories (prior 1.3%)
  • 09:45 ET: September Chicago PMI (Briefing.com consensus: 53.2; prior 47.1)
  • 10:30 ET: EIA Crude Oil Inventories (prior +2.97M)
  • 15:25 ET: Fed Governor Cook (FOMC voter) speech on rural economy
  • 17:10 ET: Chicago Fed President Goolsbee (non-FOMC voter)
  • 18:00 ET: Minneapolis Fed President Kashkari (FOMC voter)