Bond Market Update

Under Growth Pressure

• U.S. Treasuries saw steady selling interest in the overnight trade that has pushed yields higher across the curve. The move has taken the 10-yr note yield above 4.10% and has the 2-yr note yield a tick away from 4.00%. A "no landing" view, helped by central banks moving to cut rates, is thought to be behind some of the selling interest. The People's Bank of China cut its 1-yr and 5-yr loan prime rates by 25 basis points to 3.10% and 3.60%, respectively. That was more than the 20 basis points expected by the market, but at the upper end of Governor Pan's thinking that the cut would be on the order of 20-25 basis points. Commodity futures have been helped by China's stimulus action.
• Yield Check:
  • 2-yr: +4 bps to 3.99%
  • 3-yr: +5 bps to 3.91%
  • 5-yr: +5 bps to 3.93%
  • 10-yr: +6 bps to 4.13%
  • 30-yr: +6 bps to 4.44%

• News:
  • The PBOC cut its 1-yr loan prime rate and 5-yr loan prime rate by 25 basis points to 3.10% and 3.60%, respectively. That was slightly more than the 20 bps expected by the market but in-line with Governor Pan's guidance last week that pointed to the likelihood of a 20-25 basis points cut.
  • Polling averages show Vice President Kamala Harris ahead marginally nationally, but former President Trump is ahead marginally in all seven swing states. All averages are within the margin of error, according to RealClear Politics.
  • South Korea's exports for the first 20 days of October were down 2.9% yr/yr with Bloomberg indicating the decline was led by oil products and mobile phones; however, chip exports were up strongly. South Korea's imports were down 10.1% yr/yr.
  • US banks mulling interest rate reductions on corporate deposits, according to FT.
  • Fitch Ratings affirmed Italy's sovereign rating at BBB, but revised its outlook to positive from stable.
  • Israel strikes Lebanon in pursuit of degrading Hezbollah's financial arm
  • Boeing (BA): IAM/Boeing negotiated resolution contract 2024; received a negotiated proposal and resolution to end the strike
• Commodities:
  • WTI crude: +2.2% to $70.75/bbl
  • Gold: +0.8% to $2752.20/ozt
  • Copper: +1.3% to $4.44/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0850
  • GBP/USD: -0.2% to 1.3025
  • USD/CNH: +0.1% to 7.1242
  • USD/JPY: +0.3% to 149.92
• The Day Ahead:
  • 08:55 ET: Dallas Fed president Logan (non-FOMC voter)
  • 10:00 ET: September Leading Indicators (Briefing.com consensus -0.3%; prior -0.2%)
  • 13:00 ET: Minneapolis Fed President Kashkari (non-FOMC voter)
  • 17:05 ET: Kansas City Fed President Schmid (non-FOMC voter)
  • 18:40 ET: San Francisco Fed President Daly (FOMC voter)