Bond Prices Follow Bund Higher – 10-Year 2.25%

Treasury bonds were a little firmer Monday, led by the German Bund after a setback for German Chancellor Angela Merkel in the election, which weighed on euro, and following a surprise dip in the September Ifo business climate index. Though Merkel was re-elected, as was well anticipated, her position was weakened as she now faces tough coalition talks. The Bund yield fell over 4 basis points to a 0.395% low, though it’s edged up to 0.411% recently. The U.S. 10-year Treasury dropped 2 bps to 2.23%. Stocks were modestly in the red, but off their worst levels. Asian equities were mostly weaker on North Korean worries, while bonds were mixed.

The data-lite calendar offered a worse-than-expected August Chicago Fed national activity index report, which fell 0.31 (consensus 0.11) from a 0.03 rise (revised from -0.01)

Federal Reserve officials’ speeches highlight a low-key Monday calendar with New York President William Dudley on workforce development at 8:30 a.m., followed by a Q&A. Chicago’s Charles Evans takes on the economy and policy at 12:40 p.m., with a Q&A. Minneapolis’ Neel Kashkari speaks at a town hall at 6:30 p.m. also with a Q&A.

Treasury will announce details on Tuesday’s four-week bill auction at 11 a.m. and sell $42 billion three- and $36 billion six-month bills at 11:30 a.m. The remainder of the week has a batch of coupon sales including $26 billion two-years Tuesday, $34 billion five-years and $13 billion reopened two-year floating-rate notes Wednesday capped with $28 billion seven-years Thursday.

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