Bond Market Update

Market Takes September CPI in Stride

• U.S. Treasuries finished the week on a generally flat note after overcoming some early post-CPI volatility. The trading day started with modest losses that were reversed in immediate reaction to cooler-than-expected CPI (0.3%; Briefing.com consensus 0.4%) and Core CPI (0.2%; Briefing.com consensus 0.3%) readings for September. The post-data rally lifted all tenors past their highs from Thursday, where the market found resistance shortly after the CPI report crossed the wires. Treasuries pulled back from their highs as the morning went on, returning to little changed about an hour after the release of the CPI report. The rest of the morning saw some more selling that briefly pressured the 10-yr note toward its opening low, but the 10-yr note and other tenors were back at their flat lines in the late morning, maintaining a sideways range into the close. Crude oil found some resistance near its 50-day moving average (62.25) but still gained nearly $4.50/lb for the week, while the U.S. Dollar oscillated near its flat line at 98.94, adding 0.4% for the week.
• Yield Check:
  • 2-yr: UNCH at 3.48% (+2 bps this week)
  • 3-yr: UNCH at 3.49% (+2 bps this week)
  • 5-yr: +1 bp to 3.60% (+1 bp this week)
  • 10-yr: +1 bp to 4.00% (-1 bp this week)
  • 30-yr: +1 bp to 4.59% (-1 bp this week)

• News:
  • Social Security Administration announced that the cost-of-living increase for 2026 will be 2.8%.
  • President Trump will meet with China's President Xi on October 30, right before the November 1 deadline for increased tariffs on imports from China.
  • President Trump said that trade talks with Canada have been terminated.
  • China replaced 11 Central Committee members with new officials who are seen as loyal to President Xi.
  • China approved its next five-year plan, focusing on technology breakthroughs and revitalizing consumption.
  • Japan's top trade union will seek a 5% wage hike in the spring.
  • France's Socialist party has threatened to file a no-confidence motion against the prime minster if their demand for higher taxes on wealthy individuals is not met.
  • Japan's September National CPI was up 0.1% m/m (last 0.1%), rising 2.9% yr/yr (last 2.7%). September National Core CPI was up 2.9% yr/yr, as expected (last 2.7%). Flash October Manufacturing PMI hit 48.3 (expected 48.8; last 48.5) and flash Services PMI hit 52.4 (last 53.3). August Leading Index was up 0.9% m/m (expected 1.3%; last 1.1%) and Coincident Indicator was down 1.3% m/m (expected -0.7%; last -1.8%).
  • India's flash October Manufacturing PMI hit 58.4 (last 57.7) and flash Services PMI hit 58.8 (last 60.9).
  • Australia's flash October Manufacturing PMI hit 49.7 (last 51.4) and October Services PMI hit 53.1 (last 52.4).
  • Singapore's Q3 URA Property Index was up 0.9% qtr/qtr (expected 1.2%; last 1.0%).
  • Eurozone's flash October Manufacturing PMI hit 50.0 (expected 49.8; last 49.8) and flash Services PMI hit 52.6 (expected 51.2; last 51.3).
  • Germany's flash October Manufacturing PMI hit 49.6 (expected 49.8; last 49.5) and flash Services PMI hit 54.5 (expected 51.1; last 51.5).
  • U.K.'s September Retail Sales were up 0.5% m/m (expected -0.2%; last 0.6%), rising 1.5% yr/yr (expected 0.6%; last 0.7%). September Core Retail Sales were up 0.6% m/m (last 1.0%), rising 2.3% yr/yr (expected 0.7%; last 1.3%). Flash October Manufacturing PMI hit 49.6 (expected 46.6; last 46.2) and flash Services PMI hit 51.1 (expected 51.0; last 50.8).
  • France's October Consumer Confidence rose to 90 from 88 (expected 87). Flash October Manufacturing PMI hit 48.3 (expected 48.2; last 48.2) and flash Services PMI hit 47.1 (expected 48.7; last 48.5).
  • Spain's Q3 Unemployment Rate rose to 10.45% from 10.29% (expected 10.20%) and September PPI was up 0.3% yr/yr (last -1.6%).
• Today's Data:
  • Total CPI was up 0.3% month-over-month in September (Briefing.com consensus 0.4%) following a 0.4% increase in August. Core CPI, which excludes food and energy was up 0.2% (Briefing.com consensus 0.3%) after rising 0.3% in August. On a year-over-year basis, total CPI was up 3.0% versus 2.9% in August, while core CPI was also up 3.0%, versus 3.1% in August. These readings remain above the Fed's 2.0% PCE inflation target.
    • The key takeaway from the report is that CPI and Core CPI were both cooler than expected, which will keep the market thinking that the FOMC will announce a 25-basis point rate cut at the conclusion of next week's policy meeting and should not upset expectations for another cut in December.
  • The final University of Michigan Consumer Sentiment reading for October hit 53.6 (Briefing.com consensus 55.0) versus the preliminary reading of 55.0 and the final reading of 55.1 for September. In the same period a year ago, the index stood at 70.5.
    • The key takeaway from the report is that the overall sentiment has remained pressured for the third month in a row amid persistently high inflation expectations.
• Commodities:
  • WTI crude: -0.5% to $61.47/bbl
  • Gold: -0.2% to $4137.30/ozt
  • Copper: +0.2% to $5.12/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1627
  • GBP/USD: -0.1% to 1.3304
  • USD/CNH: +0.1% to 7.1258
  • USD/JPY: +0.2% to 152.84
• The Week Ahead:
  • Monday: Durable Orders (Briefing.com consensus 0.3%; prior 2.9%) and Durable Orders ex-transport (Briefing.com consensus 0.2%; prior 0.4%) at 8:30 ET; $69 bln 2-yr Treasury note auction results at 11:30 ET; and $70 bln 5-yr Treasury note auction results at 13:00 ET
  • Tuesday: August FHFA Housing Price Index (Briefing.com consensus 0.1%; prior -0.1%) and August S&P Case-Shiller Home Price Index (Briefing.com consensus 1.9%; prior 1.8%) at 9:00 ET; October Consumer Credit (Briefing.com consensus 94.2; prior 94.2) at 10:00 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -0.3%) at 7:00 ET; September advance International Trade in Goods (prior -$85.5 bln), advance Retail Inventories (prior 0.0%), and advance Wholesale Inventories (prior -0.2%) at 8:30 ET; September Pending Home Sales (Briefing.com consensus 1.2%; prior 4.0%) at 10:00 ET: weekly crude oil inventories (prior -0.961 mln) at 10:30 ET; and October FOMC Decision (Briefing.com consensus 3.75-4.00%; prior 4.00-4.25%) at 14:00 ET
  • Thursday: Advance Q3 GDP (Briefing.com consensus 3.0%; prior 3.8%), advance Q3 GDP Deflator (Briefing.com consensus 2.7%; prior 2.1%), weekly Initial Claims (Briefing.com consensus 257,000; prior NA), and Continuing Claims (prior NA) at 8:30 ET; and weekly natural gas inventories (prior +87 bcf) at 10:30 ET
  • Friday: Q3 Employment Cost Index (Briefing.com consensus 0.9%; prior 0.9%), September Personal Income (Briefing.com consensus 0.4%; prior 0.4%), Personal Spending (Briefing.com consensus 0.4%; prior 0.6%), PCE Prices (Briefing.com consensus 0.3%; prior 0.3%), and Core PCE Prices (Briefing.com consensus 0.3%; prior 0.2%) at 8:30 ET; and October Chicago PMI (Briefing.com consensus 42.0; prior 40.6) at 9:45 ET