Bond Market Update

Padding Recent Gains

• U.S. Treasuries are on track for a modestly higher start after a quiet night in the futures market. Treasury futures navigated a sideways range, facing some light pressure near the end of the Asian session, but the weakness was reversed quickly. Japan's new prime minister will ask for a bigger stimulus package than what was spent last year and she will meet with President Trump in Japan early next week. Once again, the overnight data flow was on the light side and will remain that way during the U.S. session. The U.K. released its latest CPI report, showing no change in year-over-year CPI rate (3.8%) while Core CPI decelerated to 3.5% from 3.6%. Crude oil is rising to $58/bbl while the U.S. Dollar Index is up 0.2% at 99.09.
• Yield Check:
  • 2-yr: -2 bps to 3.44%
  • 3-yr: -2 bps to 3.44%
  • 5-yr: -1 bp to 3.55%
  • 10-yr: -2 bps to 3.94%
  • 30-yr: -2 bps to 4.53%

• News:
  • Japan's Prime Minister Takaichi is planning to propose a stimulus package that is larger than last year's to offset the impact of inflation.
  • President Trump will visit Japan early next week.
  • Japan's September trade deficit reached JPY234.6 bln (expected surplus of JPY22.0 bln; last deficit of JPY242.8 bln) as imports grew 3.3% yr/yr (expected 0.6%; last -5.2%) and exports rose 4.2% yr/yr (expected 4.6%; last -0.1%).
  • South Korea's September PPI was up 0.4% m/m (last -0.1%), rising 1.2% yr/yr (last 0.6%).
  • U.K.'s September CPI was unchanged m/m (last 0.3%), rising 3.8% yr/yr (expected 4.0%; last 3.8%). September Core CPI was unchanged m/m (expected 0.2%; last 0.3%), rising 3.5% yr/yr (expected 3.7%; last 3.6%). September Input PPI was down 0.1% m/m (expected 0.3%; last 1.1%) and Output PPI was unchanged m/m (expected 0.2%; last 0.6%). September House Price Index rose 3.0% yr/yr (expected 2.5%; last 2.8%).
• Commodities:
  • WTI Crude: +2.0% to $58.36/bbl
  • Gold: -1.8% to $4037.90/ozt
  • Copper: UNCH at $4.965/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1586
  • GBP/USD: -0.3% to 1.3331
  • USD/CNH: +0.1% to 7.1285
  • USD/JPY: -0.1% to 151.79
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -0.3%; prior -1.8%)
  • 10:30 ET: Weekly crude oil inventories (prior +3.52 mln)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results