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Update: 2017-10-31 08:55:32 ET

Moving the Market

-- Q3 Employment Cost Index (actual: +0.7%; Briefing.com consensus: 0.6%; prior: 0.5%)

-- August S&P Case-Shiller Home Price Index (Briefing.com consensus: 5.9%; prior 5.8%) at 9:00 ET

-- October Chicago PMI (Briefing.com consensus: 61.0; prior 65.2) at 9:45 ET

-- October Consumer Confidence (Briefing.com consensus: 121.5; prior: 119.8) at 10:00 ET

-- FOMC begins two-day meeting: no policy change expected


10/31/2017
8:10:41 ET
10-Year:-4/32 2.384    GNMAs:     EUR/USD:1.1635    USD/JPY:113.38   

Yields Mostly Higher

  • European debt has seen some light selling today, sending regional yields slightly higher. The European session has been subdued due to limited involvement of German investors. Markets in Germany are closed for Reformation Day today. Spanish debt has shown some relative strength amid reports indicating separatist parties in Catalonia appear willing to accept an election on December 21. Catalan President Carles Puigdemont is in Brussels, trying to rally support for Catalan independence.
  • European Economic Data:
    • Eurozone Q3 GDP +0.6% quarter-over-quarter, as expected (last 0.6%); +2.5% year-over-year (expected 2.1%; last 2.1%). September Unemployment Rate 8.9% (expected 9.0%; last 9.0%). October CPI +1.4% year-over-year (expected 1.5%; last 1.5%) and Core CPI +0.9% year-over-year (consensus 1.1%; last 1.1%)
    • Italy's October CPI -0.2% month-over-month (expected -0.1%; last -0.3%); +1.0% year-over-year (expected 1.3%; last 1.1%). September Unemployment Rate 11.1%, as expected (last 11.1%). September PPI +0.3% (last 0.5%); +2.0% year-over-year (last 1.6%)
    • France's Q2 GDP +0.5% quarter-over-quarter, as expected (last 0.5%). September Consumer Spending +0.9% month-over-month (expected 0.5%; last -0.2%). October CPI +0.1% month-over-month, as expected (last -0.2%)
  • Yield Check:
    • France, 10-yr OAT: +1 bp to 0.77%
    • Germany, 10-yr bund: +1 bp to 0.38%
    • Greece, 10-yr note: -4 bps to 5.46%
    • Italy, 10-yr BTP: +1 bp to 1.85%
    • Portugal, 10-yr PGB: +2 bps to 2.10%
    • Spain, 10-yr ODE: UNCH at 1.49%
    • U.K., 10-yr gilt: -1 bp to 1.33%

 
10/31/2017
7:52:07 ET
10-Year:-3/32 2.383    GNMAs:     EUR/USD:1.1635    USD/JPY:113.31   

Trimming Monday's Gains

  • U.S. Treasuries have erased a portion of yesterday's gains during overnight action. The 2-yr note has been at the forefront of the selling while longer maturities show slimmer losses. The overnight downtick in U.S. Treasuries took place alongside other sovereign issues. China's 10-yr yield rose another three basis points to 3.92%, its highest level in more than three years. The People's Bank of China is reportedly preparing to launch a medium-term lending facility at the end of this week. The Bank of Japan left its interest rate on excess reserves unchanged at -0.1%, as expected. The central bank lowered its inflation forecast for the fiscal year to 0.8% from 1.1% despite constant reassurances from policymakers that meeting the inflation target is 'just around the corner.' BoJ Governor Haruhiko Kuroda blamed the revision on lower prices of mobile phones.
  • Yield Check:
    • 2-yr: +2 bps to 1.58%
    • 5-yr: +1 bp to 2.01%
    • 10-yr: +1 bp to 2.38%
    • 30-yr: +1 bp to 2.89%
  • News:
    • China's October Manufacturing PMI 51.6 (expected 52.0; last 52.4) and October Non-Manufacturing PMI 54.3 (last 55.4)
    • Japan's September Industrial Production -1.1% month-over-month (expected -1.5%: last 2.0%). September Household Spending +0.4% month-over-month (expected 0.1%; last 0.2%); -0.3% year-over-year (consensus 0.7%; last 0.6%). September Unemployment Rate held at 2.8%, as expected. September Housing Starts -2.9% year-over-year (consensus -3.6%; last -2.0%)
    • Australia's September HIA New Home Sales -6.1% month-over-month (last 9.1%) and September Private Sector Credit +0.3% month-over-month (expected 0.5%; last 0.5%)
    • New Zealand's October ANZ Business Confidence -10.1 (last 0.0) and September Business Consents -2.3% month-over-month (last 5.9%)
    • South Korea's September Industrial Production +0.1% month-over-month (expected 2.4%; last 0.4%); +8.4% year-over-year (consensus 4.7%; last 2.7%)
    • Hong Kong's September M3 Money Supply +13.2% (last 13.1%)
    • New Zealand's Prime Minister Jacinda Ardern reiterated her intent to ban foreigners from buying existing homes.
  • Data out Today:
    • Q3 Employment Cost Index (Briefing.com consensus: 0.6%; prior: 0.5%) at 8:30 ET
    • August S&P Case-Shiller Home Price Index (Briefing.com consensus: 5.9%; prior 5.8%) at 9:00 ET
    • October Chicago PMI (Briefing.com consensus: 61.0; prior 65.2) at 9:45 ET
    • October Consumer Confidence (Briefing.com consensus: 121.5; prior: 119.8) at 10:00 ET

 
10/30/2017
3:33:37 ET
10-Year:+11/32 2.373    GNMAs:     EUR/USD:1.1645    USD/JPY:113.12   

Last Week's Losses Erased

  • U.S. Treasuries ended Monday with solid gains, erasing their losses from last week. Treasury futures edged higher in overnight action and the advance continued until the cash close. Treasuries extended their opening gains after this morning's data showed that Personal Spending (+1.0%; Briefing.com consensus 0.8%) growth outpaced Personal Income growth in September (actual: +0.4%; Briefing.com consensus 0.3%). Treasuries extended their gains in mid-morning action, rising amid reports that the highly-anticipated corporate tax cut could be implemented in staggered fashion over a five-year stretch.
  • Yield Check:
    • 2-yr: -3 bps to 1.56%
    • 5-yr: -5 bps to 2.00%
    • 10-yr: -5 bps to 2.37%
    • 30-yr: -6 bps to 2.88%
  • News:
    • Personal income increased 0.4% in September (Briefing.com consensus +0.3%), led by a 0.4% increase in wages and salaries, and personal spending increased 1.0% (Briefing.com consensus +0.8%), led by a 2.1% jump in goods spending.
      • The report also revealed a 0.4% increase in the PCE Price Index and a 0.1% increase in the core PCE Price Index, which excludes food and energy, as expected.
      • The PCE Price Index is the Fed's preferred inflation gauge. With the September increases, the PCE Price Index is up 1.6% year-over-year, versus up 1.4% for August, while the core PCE Price Index is up 1.3%, unchanged from August.
      • The key takeaway is that the PCE price data won't trigger any major inflation alarm, yet it also won't be seen as persuading the Fed from raising the fed funds rate at its December meeting.
    • Treasury Secretary Steven Mnuchin reiterated that the Treasury does not see a lot of demand for issuance of ultra-long bonds.
    • U.S. Treasury expects to issue $275 billion in marketable debt in the fourth quarter
    • President Trump is expected to announce his Fed Chair appointment on Thursday
    • Former Trump campaign manager Paul Manafort was indicted on 12 charges. Former adviser George Papadopoulos pleaded guilty to lying to federal agents
  • Commodities:
    • WTI crude: +0.5% to $54.15/bbl
    • Gold: +0.5% to $1277.50/ozt
    • Copper: UNCH at $3.11/lb
  • Currencies:
    • EUR/USD: +0.3% to 1.1645
    • USD/JPY: -0.5% to 113.12
  • Data out Tuesday:
    • Q3 Employment Cost Index (Briefing.com consensus: 0.6%; prior: 0.5%) at 8:30 ET
    • August S&P Case-Shiller Home Price Index (Briefing.com consensus: 5.9%; prior 5.8%) at 9:00 ET
    • October Chicago PMI (Briefing.com consensus: 61.0; prior 65.2) at 9:45 ET
    • October Consumer Confidence (Briefing.com consensus: 121.5; prior: 119.8) at 10:00 ET