Bond Market Update

Short End Ahead

• U.S. Treasuries are on track for a lower start in longer tenors while the short end is set to build on yesterday's show of relative strength. Treasury futures inched lower through the bulk of the evening, but they bounced once the focus shifted to action in Europe. The movement took place inside a narrow range amid generally subdued action in global markets as participants await tonight's release of quarterly results from chip giant NVIDIA (NVDA). The overnight data flow was on the light side and this will remain quiet during the U.S. session. That said, it is worth noting that Australia's CPI for July (2.8% yr/yr; expected 2.3%) was much hotter than expected due to sharp increases in prices of housing, food, and alcohol/tobacco. The U.S. Treasury will follow yesterday's solid sale of 2-yr notes with a $70 bln 5-yr note auction at 13:00 ET. Crude oil holds a modest loss while the U.S. Dollar Index is up 0.5% at 98.69.
• Yield Check:
  • 2-yr: -3 bps to 3.65%
  • 3-yr: UNCH at 3.62%
  • 5-yr: UNCH at 3.74%
  • 10-yr: +1 bp to 4.27%
  • 30-yr: +2 bps to 4.93%

• News:
  • Sinolink Securities is expected to raise the funding margin deposit ratio for new clients to 100% amid concerns that a bubble is forming in Chinese equities.
  • Hungary's central bank left its policy rate unchanged at 6.50%.
  • China's July Industrial Profit was down 1.7% YTD (last -1.8%).
  • South Korea's August Manufacturing BSI Index rose to 70 from 68.
  • Australia's July MI Leading Index was up 0.1% m/m (last 0.0%). July Monthly CPI Indicator rose to 2.8% yr/yr from 1.9% (expected 2.3%). Q2 Construction Work Done was up 3.0% qtr/qtr (expected 1.0%; last -0.3%).
  • Germany's September GfK Consumer Climate fell to -23.6 from -21.7 (expected -21.5).
  • U.K.'s August CBI Distributive Trades Survey rose to -32 from -34 (expected -26).
  • Swiss August ZEW Expectations fell to -53.8 from 2.4.
• Commodities:
  • WTI Crude: +0.3% to $63.50/bbl
  • Gold: -0.3% to $3423.60/ozt
  • Copper: -1.1% to $4.41/lb
• Currencies:
  • EUR/USD: -0.5% to 1.1586 
  • GBP/USD: -0.4% to 1.3429
  • USD/CNH: +0.1% to 7.1639
  • USD/JPY: +0.5% to 148.12
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -0.5%; prior -1.4%)
  • 10:30 ET: Weekly crude oil inventories (prior -6.01 mln)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results