Long Bond Leads Higher, Manufacturing Data Misses, Fedspeak Ahead – 10-Year 1.775%

U.S. Treasuries traded higher Monday with the long bond leading the move while a run of data missed expectations. Participants are awaiting a rush of speeches from Federal Reserve officials through the week as well as policy statements from the Bank of Canada on Wednesday and the European Central Bank on Thursday. The market is anticipating a run of new issues heavy on U.S. bank offerings.

The 30-year recently traded near 2.535% from an overnight high yield/low price near 2.585% and 2.555% Friday, closing near four-month lows. The 10-year is near 1.777% from a 1.814% low and 1.792% close. The five-year is near 1.265% from an overnight 1.3015% and 1.28% Friday. The two-year recently traded 0.823% from a low near 0.8675% and a close near 0.84%.

The curve trade was aiming steeper but has seen the slope flattened back to little changed with the yield spread between the two- and 10-years near 95 plus while the the five- and 30-year yield spread traded near 1.27.

Wall Street Journal “Fed- whisperer” Jon Hilsenrath quoted Boston Fed President Eric Rosengren (who dissented at the Sept. 21 meeting) as saying that the current CME Group fed fund futures estimate of a 70% chance of a mid-December rate increase “probably is a reasonable bet.”

Data saw the October New York Empire State manufacturing index sink to a five-month low. A 0.1% rebound in the September industrial production report undershot the 0.2% expected while the capacity utilization data was also short at 75.4% versus consensus of 75.6%.

New issues are expected to be between $15 billion and $30 billion on the week from just over $30 billion priced last week. The Kingdom of Saudi Arabia is expected to offer up to $10 billion in five-, 10- and 30-years early in the week. Industrial & Commercial Bank of China has benchmark five- and 10-year notes. Korea National Oil also has a five- and 10-year offering, while Turkiye Is Bankasi is selling 5.5-year paper. Other issues potentially pricing early this week include Citigroup with a benchmark 10-year, a 7-year from JPMorgan, along with issues from Wells Fargo and Bank of America. The European Investment Bank is expected to have a three-year global offering Tuesday.

Treasury will offer details on Tuesday’s four-week bill auction at 11 a.m. ET and sell $42 billion three- and $36 billion six-month bills at 11:30 a.m.

Fed Vice Chair Stanley Fischer kicks off a heavy week of Fedspeak at at the Economic Club of New York at 12:15 p.m.

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