Bond Market Update

Safety is on

• U.S. Treasuries continue to find a bid, garnering some added support today from the election uncertainty in France that is fueling safe-haven bids. European bourses are weak (CAC -2.2%), credit spreads have widened, and European bank stocks are on the defensive. Separately, the Bank of Japan left its OCR rate unchanged at around 0.0% to 0.1%, as expected, and voted to reduce bond purchases over the next one to two years or so, holding off on details until the July policy meeting. Governor Ueda, according to Nikkei, said the reductions would likely be sizable. China reported much lower-than-expected new loan data for May. The U.S. Dollar Index is up 0.3% to 105.53.
• Yield Check:
  • 2-yr: -1 bp to 4.69%
  • 3-yr: -2 bps to 4.41%
  • 5-yr: -3 bps to 4.21%
  • 10-yr: -4 bps to 4.20%
  • 30-yr: -6 bps to 4.34%

• News:
  • France's left-wing parties are aligning as a "Popular Front" to challenge Marine Le Pen's far-right National Rally Party. France's finance minister warns that a left-wing win could mean an EU exit.
  • French President Emmanuel Macron's party could face wipeout in snap elections after left formed unity pact, according to FT
  • European bank stocks getting clipped on France's election uncertainty
  • The Bank of Japan left its uncollateralized overnight call rate unchanged at around 0.0% to 0.1%, as expected, and voted 8-1 that it would reduce bond purchases over the next one to two years or so; will provide more details at next policy meeting in July, but Governor Ueda suggests reduction would likely be sizable, according to Nikkei
  • Former President Trump told CEOs yesterday he will ask Congress to lower corporate tax rate to 20% if he wins the presidency, according to Bloomberg
  • G7 members agree to increase enforcement of Russian oil price cap, according to Bloomberg
  • India's May wholesale inflation hits 15-month high of 2.61%
  • Taiwan's central bank also left its key interest rate unchanged at 2.0%, and raised the lenders' reserve requirement ratio by 25 basis points
  • New York Community discloses that it assumed substantially all of the deposits and certain identified liabilities and acquired certain assets and lines of business of Signature Bridge Bank (SBNY) from FDIC
  • China's May New Loans CNY950.0B (expected CNY2,250.0B; last CNY730.0B)
• Commodities:
  • WTI crude: +0.4% to $78.90/bbl
  • Gold: +1.3% to $2347.40/ozt
  • Copper: +0.4% to $4.50/lb
• Currencies:
  • EUR/USD: -0.4% to 1.0697
  • GBP/USD: -0.4% to 1.2710
  • USD/CNH: flat at 7.2717
  • USD/JPY: +0.1% to 157.09
• The Day Ahead:
  • 08:30 ET: May import prices (prior 0.9%) and nonfuel import prices (prior 0.7%); May export prices (prior 0.5%) and nonagricultural export prices (prior 0.7%)
  • 10:00 ET: Preliminary June Univ. of Michigan Consumer Sentiment (Briefing.com consensus 73.0; prior 69.1)