Bond Market Update

Lower Start Ahead

• U.S. Treasuries are on track for a lower start after last week's mixed finish and yesterday's holiday closure. Treasury futures began dipping in early evening trade, accelerating their retreat as the night went on. The selling took place alongside other sovereign debt, including weakness in British gilts that drove yields on longer tenors to levels not seen in nearly 30 years as the market expresses ongoing worries about the U.K.'s fiscal standing. In the U.S., an Appellate Court ruled against many of President Trump's tariffs, but Treasury Secretary Bessent said that he expects the Supreme Court to uphold the president's tariff authority. Mr. Bessent also said that a housing emergency could be declared in the fall. Crude oil has rallied back to its 50-day moving average (65.66) while the U.S. Dollar Index is up 0.6% at 98.39.
• Yield Check:
  • 2-yr: +3 bps to 3.65%
  • 3-yr: +3 bps to 3.62%
  • 5-yr: +6 bps to 3.75%
  • 10-yr: +5 bps to 4.28%
  • 30-yr: +5 bps to 4.97%

• News:
  • South Korea is expected to gradually increase defense spending and President Lee called for bold steps to boost the potential growth rate.
  • Japan's top trade negotiator said that there is no disagreement with the U.S. after last week's visit to Washington was canceled.
  • European Central Bank policymakers Schnabel and Simkus said that there is no current need for a rate cut.
  • Japan's August Monetary Base was down 4.1% yr/yr (expected -3.5%; last -3.9%).
  • South Korea's August CPI was down 0.1% m/m (expected 0.2%; last 0.2%), rising 1.7% yr/yr (expected 2.0%; last 2.1%).
  • Australia's Q2 Current Account deficit reached AUD13.7 bln (expected deficit of AUD15.9 bln; last deficit of AUD14.1 bln). Q2 Net Exports Contribution was up 0.1% (expected 0.3%; last -0.1%).
  • New Zealand's Q2 Terms of Trade Index rose 4.1% qtr/qtr (expected 2.1%; last 1.9%).
  • Eurozone's flash August CPI was up 0.2% m/m (last 0.0%), rising 2.1% yr/yr, as expected (last 2.0%). Flash August Core CPI was up 0.3% m/m (last -0.2%), rising 2.3% yr/yr (expected 2.2%; last 2.3%).
  • France's July budget deficit EUR142.0 bln (expected -EUR107.2 bln; last -EUR100.4 bln)
  • Italy's July PPI was up 0.5% m/m (last 1.4%), rising 1.6% yr/yr (last 2.4%).
  • Spain's August Unemployment increased by 21,900 (expected 14,200; last -1,400).
• Commodities:
  • WTI Crude: +2.7% to $65.74/bbl
  • Gold: +1.1% to $3554.40/ozt
  • Copper: -0.4% to $4.574/lb
• Currencies:
  • EUR/USD: -0.5% to 1.1648
  • GBP/USD: -1.2% to 1.3378
  • USD/CNH: +0.1% to 7.1415
  • USD/JPY: +1.0% to 148.63
• Data out Today:
  • 9:45 ET: Final August S&P Global U.S. Manufacturing PMI (prior 53.3)
  • 10:00 ET: July Construction Spending (Briefing.com consensus 0.2%; prior -0.4%) and August ISM Manufacturing (Briefing.com consensus 48.6%; prior 48.0%)