1)
Explain background of Bond
2)
What types of Variables are bond investors
looking at
3)
Explain price and Yeild
Bond Market Update
Last Updated: 29-Aug-24
15:14 ET | Archive
See frequent updates
that focus on today’s bond market activity featuring an ongoing synopsis of
treasury market news and events that could have an impact on interest and FX
rates. Bond market updates start with an overnight summary of Asia and Europe
treasury session performance, news, and currency updates, in addition to a
pre-market look at the U.S. dollar index, treasury futures, commodities, and
economic data releases. After the open, get frequent updates including bond
market commentary, news, and currency performance throughout the day. After the
close, get an in-depth summary of bond market activity for the day.
Treasury
Market Summary
29-Aug-24 15:14 ET
10-Yr: -7/32..3.867%.. USD/JPY: 144.85.. EUR/USD: 1.1079
Upward Q2 GDP Revision
Weighs
·
U.S. Treasuries ended
Thursday with modest losses after a slide from opening highs. Treasuries opened
the day just above their flat lines after a subdued night in global equity
markets. NVIDIA’s (NVDA) quarterly results were strong overall but failed to meet
sky high expectations. Treasuries slid from their starting highs after economic
data released shortly after the open showed an upward revision to Q2 GDP (to
3.0% from 2.8%) and a decrease in weekly jobless claims (to 231,000 from
233,000). The post-data selling lifted yields on 10s and 30s past their highs
from yesterday, where the market bounced, recovering a portion of its losses as
the day went on. The U.S. Treasury concluded this week’s mediocre note auction
slate with a soft 7-yr note sale. Crude oil recovered yesterday’s loss while
the U.S. Dollar Index rose 0.3% to 101.34.
·
Yield Check:
·
2-yr: +2 bps to 3.89%
·
3-yr: +3 bps to 3.76%
·
5-yr: UNCH at 3.67%
·
10-yr: +3 bps to 3.87%
·
30-yr: +2 bps to 4.15%
·
News:
·
Fitch affirmed the AA+
rating for the U.S. with a Stable outlook.
·
Atlanta Fed President
(FOMC voter) Bostic said that it may be time to cut rates, but he wants to see
more data, according to Bloomberg.
·
Sweden’s Riksbank is on
track to cut rates two or three more times this year, according to Deputy
Governor Bunge.
·
The Italian government
is expected to signal commitment to reducing its deficit-to-GDP ratio below the
EU’s 3.0% target in 2026.
·
Chinese banks struggled
after Bank of Communications reported poor results.
·
Japan’s August Household
Confidence remained at 36.7 (expected 36.9).
·
Australia’s Q2 Building
Capital Expenditure decreased 3.8% qtr/qtr (last -0.9%), Q2 Plant/Machinery
Capital Expenditure fell 0.5% qtr/qtr (last 3.7%), and Q2 Private New Capital
Expenditure was down 2.2% qtr/qtr (expected 0.9%; last 1.9%).
·
New Zealand’s August ANZ
Business Confidence jumped to 50.6 from 27.1.
·
Eurozone’s August
Business and Consumer Survey rose to 96.6 from 96.0 (expected 95.8).
·
Germany’s flash August
CPI was down 0.1% m/m (expected 0.0%; prior 0.3%) and up 1.9% yr/yr (expected
2.1%; last 2.3%).
·
Spain’s flash August CPI
was unchanged m/m (expected 0.1%; last -0.5%), rising 2.2% yr/yr (expected
2.4%; last 2.8%). August Core CPI was up 2.7% yr/yr (last 2.8%). July Business
Confidence ticked up to -3.6 from -4.2.
·
Today’s Data:
·
The second estimate for
Q2 GDP was revised up to 3.0% from the preliminary estimate of 2.8% on the back
of an upward revision to consumer spending. The GDP Deflator was revised up to
2.5% from 2.3%.
·
The key takeaway from
the report is that consumer spending was solid in the second quarter, exceeding
the prior eight quarter average of 2.2%.
·
Initial jobless claims
for the week ending August 24 decreased by 2,000 to 231,000 while continuing
jobless claims for the week ending August 17 increased by 13,000 to 1.868
million.
·
The key takeaway from
the report is the steady standing of initial jobless claims, which remain well
below levels typically associated with an economy in recession.
·
The Advance Intl. Trade
in Goods deficit widened to $102.7 billion in July from an upwardly revised
$96.6 billion (from -$96.8 billion) in June, with exports roughly flat and
imports $6.1 billion more than June imports.
·
The key takeaway from
the report is that the uptick in imports was led by industrial supplies and
capital goods, which is what one would expect in a growing economy.
·
Advance Retail
Inventories were up 0.8% in July after increasing a revised 0.9% (from 0.7%) in
June.
·
Advance Wholesale
Inventories were up 0.3% in July after increasing a revised 0.1% (from 0.2%) in
June.
·
Pending Home Sales were
down 5.5% in July (Briefing.com consensus 1.2%) after increasing 4.8% in June.
·
Weekly natural gas
inventories increased by 35 bcf for the second consecutive week.
·
$44 bln 7-year Treasury
note auction results (prior 12-auction average):
·
High yield: 3.770%
(4.373%).
·
Bid-to-cover: 2.50
(2.56).
·
Indirect bid: 75.1%
(68.6%).
·
Direct bid: 11.2%
(17.5%).
·
Commodities:
·
WTI crude: +1.8% to
$75.90/bbl
·
Gold: +0.9% to
$2560.40/ozt
·
Copper: +0.5% to
$4.23/lb
·
Currencies:
·
EUR/USD: -0.4% to 1.1079
·
GBP/USD: -0.1% to 1.3170
·
USD/CNH: -0.5% to 7.0943
·
USD/JPY: +0.3% to 144.85
·
The Day Ahead:
·
8:30 ET: July Personal
Income (Briefing.com consensus 0.2%; prior 0.2%), Personal Spending
(Briefing.com consensus 0.5%; prior 0.3%), PCE Prices (Briefing.com consensus
0.2%; prior 0.1%), and Core PCE Prices (Briefing.com consensus 0.1%; prior
0.2%)
·
10:00 ET: final August
University of Michigan Consumer Sentiment (Briefing.com consensus 67.8; prior
67.8)
Auction
Reaction
29-Aug-24 13:12 ET
10-Yr: -6/32..3.867%.. USD/JPY: 144.84.. EUR/USD: 1.1080
Auction Reaction
·
U.S. Treasuries have
climbed off session lows that were reached about two hours ago, but most tenors
remain in the red while the 5-yr note has returned to its flat line, making for
a continuation of today’s outperformance. The market is holding near its rebound
highs even though the just-completed $44 bln 7-yr note sale met soft demand, as
the high yield (3.770%) tailed the when-issued yield by 0.9 basis points while
the bid-to-cover ratio (2.50x) was below average (2.56x). Foreign demand
remained strong, however, as indirect takedown (75.1%) was comfortably above
the prior 12-auction average (68.6%). The 7-yr note sale makes for an
unimpressive finish to this week’s note auction slate that started with a
strong 2-yr note offering on Tuesday. On a side note, Fitch affirmed the
AA+ rating for the United States with a Stable outlook.
·
Yield Check:
·
2-yr: +2 bps to 3.89%
·
3-yr: +3 bps to 3.76%
·
5-yr: +1 bp to 3.67%
·
10-yr: +3 bps to 3.87%
·
30-yr: +2 bps to 4.15%
Auction
Out
29-Aug-24 13:04 ET
10-Yr: -6/32..3.865%.. USD/JPY: 144.98.. EUR/USD: 1.1082
Treasury Auction Results
·
$44
bln 7-year Treasury note auction:
·
Auction
results:
·
High
yield: 3.770% (When-Issued: 3.761%)
·
Bid-to-cover:
2.50
·
Indirect
bid: 75.1%
·
Direct
bid: 11.2%
·
Average results of
previous 12 auctions:
·
High yield: 4.373%
·
Bid-to-cover: 2.56
·
Indirect bid: 68.6%
·
Direct bid: 17.5%
New
Supply
29-Aug-24 11:29 ET
10-Yr: -9/32..3.883%.. USD/JPY: 145.27.. EUR/USD: 1.1074
Treasury Auction Preview
·
$44
bln 7-year Treasury note auction (results at 13:00 ET)
·
Prior auction results:
·
High yield: 4.162%
·
Bid-to-cover: 2.64
·
Indirect bid: 74.4%
·
Direct bid: 16.8%
·
Average
results of previous 12 auctions:
·
High
yield: 4.373%
·
Bid-to-cover:
2.56
·
Indirect
bid: 68.6%
·
Direct
bid: 17.5%
Hovering
Near Lows
29-Aug-24 10:16 ET
10-Yr: -6/32..3.865%.. USD/JPY: 145.26.. EUR/USD: 1.1070
Hovering Near Lows
·
U.S. Treasuries trade in
the red after slipping from their opening levels. The market started the day
with slim gains and relative strength in the 5-yr note, but the entire complex
retreated after receiving this morning’s batch of economic data, which was
headlined by an upward revision to Q2 GDP (to 3.0% from 2.8%) and a decrease in
weekly jobless claims (to 231,000 from 233,000). The post-data retreat lifted
yields on 10s and 30s past their highs from Tuesday while the past 30 minutes
have seen a small bounce off lows. Equities are off to a higher start with the
S&P 500 rising 0.5% as it overcomes a poor response to a quarterly report
and guidance from NVIDIA (NVDA 121.02, -4.59, -3.7%).
·
Yield Check:
·
2-yr: +2 bps to 3.89%
·
3-yr: +2 bps to 3.75%
·
5-yr: UNCH at 3.67%
·
10-yr: +2 bps to 3.86%
·
30-yr: +2 bps to 4.15%