Bond Market Update

Longer Tenors Under Continued Pressure

• U.S. Treasuries faced more pressure on Thursday, sending yields on 10s and 30s to fresh highs for the year for the third consecutive day. Longer tenors underperformed from the start while shorter tenors displayed modest gains in early trade, but the entire complex ran into selling pressure about an hour after the cash start. The selling, which continued through the morning, pushed the 10-yr yield to within a basis point of its high from October (4.333%), but at 4.308%, the 10-yr yield still ended the day at its highest level since November 2007. Meanwhile, the 30-yr yield briefly inched above its high from last year (4.425%), ending the day at a level not seen since July 2011. The market received just a small batch of positive data today, headlined by a solid drop in weekly jobless claims (to 239,000 from 250,000) and a rebound in the Philadelphia Fed survey (to 12.0 from -13.5). In addition, retail giant Walmart (WMT) reported better than expected results for Q2 this morning. The market will not receive any notable data tomorrow, but price action itself will likely be the focal point since yields on shorter tenors are also not far from setting fresh highs for the year. Crude oil snapped a three-day skid while the U.S. Dollar Index ticked up 0.1% to 103.49 after recovering from an intraday slip past its 200-day moving average (103.27).
• Yield Check:
  • 2-yr: -1 bp to 4.96%
  • 3-yr: +1 bp to 4.68%
  • 5-yr: +3 bps to 4.44%
  • 10-yr: +5 bps to 4.31%
  • 30-yr: +5 bps to 4.41%

• News:
  • Norges Bank raised its deposit rate by 25 bps to 4.00% and indicated that another rate hike is likely to take place in September.
  • Chinese officials have reportedly asked some funds to avoid net equity sales this week, looking to alleviate some pressure on the real estate sector.
  • Australia reported its first month of job losses since April, fueling calls for the Reserve Bank of Australia to refrain from raising rates again.
  • Japan's 20-yr debt sale was met with dismal demand.
  • European Central Bank policymaker Kazaks said that any additional rate hikes would be small.
  • British Prime Minister Sunak said he is committed to maintaining the government's plan for raising state pensions, even though this could result in a double-digit increase.
  • Japan's June Core Machinery Orders were up 2.7% m/m (expected 3.6%; last -7.6%) but fell 5.8% yr/yr (expected -5.5%; last -8.7%). June Tertiary Industry Activity Index fell 0.4% m/m (expected -0.2%; last 1.2%). July trade deficit reached JPY560 bln (expected deficit of JPY660 bln; last deficit of JPY540 bln) as imports fell 13.5% yr/yr (expected -14.7%; last -12.9%) and exports decreased 0.3% yr/yr (expected -0.8%; last 1.5%).
  • South Korea's July Import Price Index was down 13.5% yr/yr (expected -20.8%; last -16.1%) and Export Price Index was down 12.8% yr/yr (expected -16.5%; last -15.0%).
  • Singapore's July trade surplus reached $6.49 bln (last surplus of $5.851 bln) as non-oil exports fell 3.4% m/m (expected 2.6%; last 5.2%), dropping 20.2% yr/yr (expected -16.5%; last -15.6%). 
  • Hong Kong's July Unemployment Rate dipped to 2.8% from 2.9%, as expected.
  • Australia's July employment decreased by 14,600 (expected 15,000; last 31,600) and full employment fell 24,200 (last 38,000). July Unemployment Rate rose to 3.7% from 3.5% (expected 3.6%) and participation rate dipped to 66.7% from 66.8% (expected 66.8%).
  • New Zealand's Q2 Input PPI was down 0.2% qtr/qtr (expected 0.2%; last 0.0%) and Output PPI was up 0.2% qtr/qtr (expected 0.7%; last 0.2%).
  • Eurozone's June trade surplus reached EUR23.0 bln (expected surplus of EUR18.3 bln; last deficit of EUR300 mln).
  • Spain's June trade deficit reached EUR2.36 bln (expected deficit of EUR4.31 bln; last deficit of EUR3.11 bln).
• Today's Data:
  • Initial jobless claims for the week ending August 12 decreased by 11,000 to 239,000 (Briefing.com consensus 240,000) and continuing jobless claims for the week ending August 5 increased by 32,000 to 1.716 million.
    • The key takeaway from the report is that initial jobless claims -- a leading indicator -- are pacing at levels that are indicative of a tight labor market, which is indicative of an economy that isn't pacing for a hard landing.
  • The August Philadelphia Fed Index jumped to 12.0 (Briefing.com consensus -9.0) from -13.5 in July with indicators for general activity, new orders, and shipments all positive for the first time since May 2022.
    • A number above 0.0 for this series is indicative of an expansion in manufacturing activity in the region. The future indexes for this survey, however, pointed to less widespread expectations for growth over the next six months, as the diffusion index for general business activity slid to 3.9 from 29.1 in July.
  • The Conference Board's Leading Economic Index was down 0.4% in July (Briefing.com consensus -0.4%) after decreasing 0.7% in June.
  • Weekly natural gas inventories increased by 35 bcf after increasing by 29 bcf a week ago.
• Commodities:
  • WTI crude: +1.1% to $80.31/bbl
  • Gold: -0.7% to $1915.30/ozt
  • Copper: +0.7% to $3.68/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0864
  • GBP/USD: +0.1% to 1.2737
  • USD/CNH: -0.3% to 7.3099
  • USD/JPY: -0.3% to 145.79
• No Data on Tomorrow's Schedule