Bond Market Update

Bid Persists Ahead of August CPI

• U.S. Treasuries are on track for a higher start ahead of the 8:30 ET release of the CPI report for August (Briefing.com consensus 0.2%; prior 0.2%). Treasury futures spent the early portion of the night in a sideways range before embarking on a rally that produced highs in early morning trade. The overnight gains coincided with renewed yen strength that lifted the Japanese currency past its early August high against the dollar to a peak of 140.71 after Bank of Japan policymaker Nakagawa said that real rates are at a very low level and that the level of easing will be adjusted if the outlook is fulfilled. Elsewhere, the U.K. reported below-consensus growth figures for July ahead of next week's policy meeting at the Bank of England. Crude oil is looking to recover some of yesterday's loss while the U.S. Dollar Index is down 0.2% at 101.40.
• Yield Check:
  • 2-yr: -3 bps to 3.58%
  • 3-yr: -6 bps to 3.41%
  • 5-yr: -3 bps to 3.40%
  • 10-yr: -3 bps to 3.62%
  • 30-yr: -3 bps to 3.93%

• News:
  • Germany's government began reducing its stake in Commerzbank.
  • The Bank of France expects Q3 domestic growth between 0.3% and 0.4% with about 25 basis points of growth from the Olympics.
  • Inditex, the owner of Zara, reported strong results for the first half of 2024 and made positive comments about the current quarter.
  • Japan's September Reuters Tankan Index fell to 4 from 10.
  • South Korea's August Unemployment Rate fell to 2.4% from 2.5%.
  • New Zealand's July External Migration & Visitors rose 3.8% m/m (last 3.8%).
  • U.K.'s July GDP was unchanged m/m (expected 0.2%; last 0.0%), rising 1.2% yr/yr (expected 1.4%; last 0.7%). July Construction Output was down 0.4% m/m (expected 0.4%; last 0.5%), falling 1.6% yr/yr (expected -1.0%; last -1.7%), July Industrial Production was down 0.8% m/m (expected 0.3%; last 0.8%), falling 1.2% yr/yr (expected -0.2%; last -1.4%), and July Manufacturing Production was down 1.0% m/m (expected 0.2%; last 1.1%), falling 1.3% yr/yr (expected -0.1%; last -1.5%). July trade deficit reached GBP20.00 bln (expected deficit of GBP18.00 bln; last deficit of GBP18.89 bln).
• Commodities:
  • WTI Crude: +2.4% to $67.35/bbl
  • Gold: +0.4% to $2552.10/ozt
  • Copper: +1.5% to $4.16/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1044
  • GBP/USD: +0.1% to 1.3091
  • USD/CNH: -0.2% to 7.1180
  • USD/JPY: -0.5% to 141.69
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 1.4%; prior 1.6%)
  • 8:30 ET: August CPI (Briefing.com consensus 0.2%; prior 0.2%) and Core CPI (Briefing.com consensus 0.2%; prior 0.2%)
  • 10:30 ET: Weekly crude oil inventories (prior -6.87 mln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note auction results