Bond Market Update

Pressure Returns

• U.S. Treasuries are on track for a modestly lower start after a night that was rife with economic data. Treasury futures faced some pressure after yesterday's cash close, followed by a laborious rebound that found resistance during the European session. As for the overnight data flow, Japan, South Korea, and Australia reported weak retail sales for September while South Korea's Industrial Production was also on the soft side. China reported slight improvements in Manufacturing (50.1) and non-Manufacturing (50.2) PMIs, though both reading essentially indicate a standstill in activity. The Bank of Japan left its policy rate at 0.25%, which was expected amid the uncertainty surrounding the future of Prime Minister Ishiba. In Europe, Expectations for sharp rate cuts from the European Central Bank are being reined in after eurozone's flash October CPI reaccelerated to 2.0% yr/yr. Separately, the U.K.'s 10-yr gilt yield is revisiting this year's high in the 4.51% area after yesterday's tax hike announcement. Crude oil is adding to yesterday's advance while the U.S. Dollar Index is flat at 104.04.
• Yield Check:
  • 2-yr: +3 bps to 4.18%
  • 3-yr: +3 bps to 4.15%
  • 5-yr: +3 bps to 4.16%
  • 10-yr: +1 bp to 4.28%
  • 30-yr: UNCH at 4.48%

• News:
  • The Bank of Japan maintained its 0.6% growth forecast for FY24/25 and raised the outlook for FY25/26 to 1.1% from 1.0%. Core CPI for both periods is expected at 1.9%.
  • China's October Manufacturing PMI hit 50.1 (expected 49.8; last 49.8) and Non-Manufacturing PMI hit 50.2 (expected 50.4; last 50.0).
  • Japan's September Industrial Production rose 1.4% m/m (expected 0.9%; last -3.3%) and September Retail Sales rose 0.5% yr/yr (expected 2.1%; last 3.1%). September Housing Starts were down 0.6% yr/yr (expected -4.2%; last -5.1%) and Construction Orders fell 21.3% yr/yr (last 8.7%).
  • South Korea's September Industrial Production was down 0.2% m/m (expected 1.2%; last 4.4%), falling 1.3% yr/yr (expected 0.2%; last 3.8%). September Retail Sales were down 0.4% m/m (last 1.7%).
  • Hong Kong's Q3 GDP contracted 1.1% qtr/qtr (expected 0.0%; last 0.3%) but was up 1.8% yr/yr (expected 3.1%; last 3.2%).
  • Australia's September Building Approvals were up 4.4% m/m (expected 2.2%; last -3.9%), rising 18.1% yr/yr (expected 7.9%; last 24.9%). September Retail Sales ticked up 0.1% m/m (expected 0.3%; last 0.7%). September Housing Credit was up 0.5% m/m (last 0.4%) and Private Sector Credit was also up 0.5% m/m, as expected (last 0.5%). Q3 Import Price Index fell 1.4% qtr/qtr (expected -0.2%; last 1.0%) and Export Price Index fell 4.3% qtr/qtr (last -5.9%).
  • New Zealand's October ANZ Business Confidence hit 65.7 (last 60.9).
  • Eurozone's September Unemployment Rate remained at 6.3% (expected 6.4%). Flash October CPI was up 0.3% m/m (last -0.1%), rising 2.0% yr/yr (expected 1.9%; last 1.7%). Flash Core CPI was up 0.2% m/m (last 0.1%), rising 2.7% yr/yr (expected 2.6%; last 2.7%).
  • Germany's September Retail Sales were up 1.2% m/m (expected -0.7%; last 1.2%), growing 3.8% yr/yr (expected 1.6%; last 2.5%). September Import Price Index was down 0.4% m/m, as expected (last -0.4%), falling 1.3% yr/yr (last 0.2%).
  • France's flash October CPI was up 0.2% m/m (expected 0.2%; last -1.2%), rising 1.2% yr/yr (expected 1.1%; last 1.1%). September PPI was down 0.1% m/m (last 0.3%), falling 7.0% yr/yr (last -6.3%).
  • Italy's September Unemployment Rate remained at 6.1% (expected 6.2%). Flash October CPI was unchanged m/m (expected -0.1%; last -0.2%), rising 0.9% yr/yr (expected 1.0%; last 0.7%).
  • Spain's August Current Account surplus reached EUR5.63 bln (last EUR5.79 bln).
• Commodities:
  • WTI Crude: +0.7% to $69.08/bbl
  • Gold: -0.4% to $2789.40/ozt
  • Copper: -0.2% to 4.344/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0868
  • GBP/USD: +0.1% to 1.2979
  • USD/CNH: +0.1% to 7.1268
  • USD/JPY: -0.4% to 152.73
• Data out Today:
  • 8:30 ET: September Personal Income (Briefing.com consensus 0.4%; prior 0.2%), Personal Spending (Briefing.com consensus 0.4%; prior 0.2%), PCE Prices (Briefing.com consensus 0.2%; prior 0.1%), and Core PCE Prices (Briefing.com consensus 0.2%; prior 0.1%), Q3 Employment Cost Index (Briefing.com consensus 1.0%; prior 0.9%), weekly Initial Claims (Briefing.com consensus 229,000; prior 227,000), and Continuing Claims (prior 1.897 mln)
  • 9:45 ET: October Chicago PMI (Briefing.com consensus 47.5; prior 46.6)
  • 10:30 ET: Weekly natural gas inventories (prior +80 bcf)