Bond Market Update

Short End Ahead

• U.S. Treasuries are on track for a higher start in shorter tenors while the long bond is expected to start in negative territory, continuing yesterday's underperformance. Treasury futures faced some pressure in early evening action but bounced during the latter half of the Asian session, continuing their rebound into the early morning. Overnight trade saw a strong showing from equities in Asia with markets in Japan (+2.1%) and Hong Kong (+2.0%) showing strength amid a light data flow. Hong Kong Monetary Authority followed the FOMC rate cut with a 50-bps reduction of its own while the Bank of England and Norges Bank made no policy changes. Crude oil is recovering yesterday's loss while the U.S. Dollar Index is up 0.1% at 100.68.
• Yield Check:
  • 2-yr: -3 bps to 3.57%
  • 3-yr: -1 bp to 3.46%
  • 5-yr: UNCH at 3.47%
  • 10-yr: +2 bps to 3.71%
  • 30-yr: +3 bps to 4.04%

• News:
  • Hong Kong Monetary Authority lowered its base rate by 50 bps to 5.25%.
  • The Bank of England maintained its bank rate at 5.00%.
  • Norges Bank left its policy rate at 4.50%.
  • British retailer Next reported solid results for the first half of the year and raised its guidance for the year.
  • Volkswagen is reportedly planning larger cost cuts that will include job cuts.
  • European Central Bank policymaker Centeno said that the ECB may need to step up the pace of rate cuts, so inflation doesn't undershoot the target.
  • South Korea's August trade surplus reached $3.77 bln (last surplus of $3.83 bln) as imports rose 6.0% yr/yr (last 6.0%) and exports grew 11.2% (last 11.4%).
  • Hong Kong's August Unemployment Rate held at 3.0%.
  • Australia's August Employment increased by 47,500 (expected 26,400; last 48,900) and full employment decreased by 3,100 (last 64,700). Unemployment Rate held at 4.2%, as expected, while Participation Rate held at 67.1%, as expected.
  • New Zealand's Q2 GDP contracted 0.2% qtr/qtr (expected -0.4%; last 0.1%), falling 0.5% yr/yr, as expected (last 0.5%).
  • Eurozone's July Current Account surplus reached EUR39.6 bln (expected surplus of EUR40.3 bln; last surplus of EUR51.0 bln).
  • Swiss August trade surplus reached CHF4.578 bln (expected surplus of CHF5.05 bln; last surplus of CHF4.877 bln).
• Commodities:
  • WTI Crude: +0.8% to $71.48/bbl
  • Gold: +0.6% to $2614.50/ozt
  • Copper: +1.2% to $4.35/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1158 
  • GBP/USD: +0.6% to 1.3284
  • USD/CNH: -0.3% to 7.0687
  • USD/JPY: +0.6% to 142.92
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 232,000; prior 230,000), Continuing Claims (prior 1.850 mln), Q2 Current Account (prior -$237.6 bln), and September Philadelphia Fed (Briefing.com consensus 3.0; prior -7.0)
  • 10:00 ET: August Existing Home Sales (Briefing.com consensus 3.90 mln; prior 3.95 mln) and August Leading Indicators (Briefing.com consensus -0.3%; prior -0.6%)
  • 10:30 ET: Weekly natural gas inventories (prior +40 bcf)