Core Viewpoint - US Treasury bonds experienced a decline on Thursday, influenced by better-than-expected employment data and rising oil prices, with traders focusing on upcoming non-farm payroll data and a Supreme Court ruling on tariffs [1][4]. Group 1: Market Performance - Treasury yields rose by 1.5 to 4 basis points, with the mid-curve leading the increase, and the 2-year/5-year and 2-year/10-year yield spreads steepening by 1.5 basis points [1][4]. - The 10-year Treasury yield closed at approximately 4.18%, up 3 basis points, nearing its intraday high [2][5]. Group 2: Economic Indicators - The decline in Treasury prices was primarily due to robust readings from the Challenger job cuts data and weekly initial jobless claims [1][5]. - WTI crude oil prices increased by over 4%, contributing to upward pressure on yields [2][5]. Group 3: Trading Activity - Active trading was noted in both Treasury bonds and SOFR options ahead of the employment report, with significant demand for a 1-day option betting on a larger bond market rebound [2][5]. - There was strong demand for the 97.50 call option on the 1-year curve maturing in September 2026 during the afternoon trading session [2][5]. Group 4: Yield Rates - As of 3:15 PM Eastern Time, the following yields were reported: 2-year at 3.4881%, 5-year at 3.7359%, 10-year at 4.181%, and 30-year at 4.8569% [3][6]. - The yield spread between the 5-year and 30-year bonds was 111.93 basis points, while the spread between the 2-year and 10-year bonds was 69.27 basis points [3][6].

Market Trends - China's benchmark bond yield is poised to fall below Japan's [1] - This crossover may reignite fears that China is sliding into a deflationary spiral [1] Economic Concerns - The deflationary spiral is reminiscent of Japan in the 1990s [1]

Core Viewpoint - The Indian government is adjusting its borrowing strategy, increasing the issuance of 10-year bonds while reducing the overall gross borrowing for the fiscal year, which is expected to lead to increased selling pressure on these bonds [6]. Group 1: Government Borrowing Plans - The government plans to raise 6.77 trillion rupees ($76.38 billion) from October to March, following 7.95 trillion rupees in debt sales from April to September [4]. - More than 28% of the upcoming borrowing will be through the sale of 10-year bonds, with weekly auction sizes increasing from 300 billion rupees to 320 billion rupees [5]. Group 2: Bond Market Dynamics - The yield on the 10-year benchmark note is projected to fluctuate between 6.53% and 6.58%, having closed at 6.5231% on the previous Friday [1][6]. - There is an expectation that the bond yield curve will flatten slightly towards the middle and longer end, indicating a potential shift in investor sentiment [5][6]. - The trader noted that the spreads between longer-term bonds and the 10-year yield should decrease due to anticipated selling pressure on the benchmark paper [2][6]. Group 3: Market Reactions and Indicators - India's overnight index swaps (OIS) are expected to see increased interest payments, influenced by rising 10-year bond yields and higher U.S. Treasury yields [7]. - The one-year OIS rate ended at 5.46%, while the two-year OIS rate settled at 5.45%, and the five-year OIS rate closed at 5.7450% [7].

Group 1 - The British pound has experienced significant volatility this week due to concerns over the UK's fiscal situation and government control, leading to fluctuations in exchange rates [1] - As of the report, the pound is trading at 1.3434 against the dollar, marking three consecutive weeks of decline, while the euro is stable at 86.67 pence [1] - The yield on UK 30-year government bonds surged to its highest level since 1998, influenced by a global sell-off of long-term bonds [1] Group 2 - The rise in government bond yields typically supports the local currency; however, in this case, the increase is driven by inflation concerns rather than optimism about long-term economic growth, putting pressure on the pound [1] - The Bank of England's Governor Andrew Bailey indicated uncertainty regarding the pace of future interest rate cuts, following a reduction in August [1] - Market expectations for a rate cut in November have dropped significantly from 67% to 18%, suggesting that UK bond yields may remain elevated compared to other major economies [2] Group 3 - The UK currently has the highest borrowing costs among G7 economies, with a 10-year government bond yield of 4.74%, compared to 4.2% in the US and 1.6% in Japan [2] - UK Chancellor Rachel Reeves is under pressure to maintain fiscal stability and has committed to strict spending controls ahead of the autumn budget announcement on November 26 [2]