Bond Market Update

Early Resilience on Display

• U.S. Treasuries are on track for a modestly higher start that will reverse the bulk of yesterday's losses at the open. Treasury futures dipped in the evening, but bounced during the Asian session, continuing their advance into the night. The market reached highs in recent trade with the belly showing slight relative strength. Overnight action brought the release of flash Manufacturing and Services PMI readings from major economies. Japan's flash Manufacturing PMI (50.1) reading showed a deceleration in the pace of growth while Australia's reading (47.5) fell deeper into contraction. Japan's Services PMI (49.8) fell into contraction while India's Manufacturing (58.5) and Services (60.4) readings remained comfortably in expansionary territory. The situation looked worse in Europe as flash Manufacturing and Services PMI readings from France (Manufacturing: 45.3; Services: 48.8) and Germany (Manufacturing: 43.4; Services: 53.5) disappointed while the U.K.'s Manufacturing PMI (51.4) showed slightly higher than expected growth. The U.S. session will also see the release of PMI readings, followed by May Existing Home Sales (Briefing.com consensus 4.10 mln; prior 4.14 mln) and May Leading Indicators (Briefing.com consensus -0.3%; prior -0.6%) at 10:00 ET. Crude oil is building on this week's gain while the U.S. Dollar Index is up 0.2% at 105.80.
• Yield Check:
  • 2-yr: -3 bps to 4.70%
  • 3-yr: -3 bps to 4.43%
  • 5-yr: -4 bps to 4.23%
  • 10-yr: -2 bps to 4.23%
  • 30-yr: -2 bps to 4.37%

• News:
  • The U.S. Treasury's latest semi-annual currency report did not label any major trading partners as currency manipulators.
  • Richmond Fed President (FOMC voter) Barkin said that more clarity on inflation is needed before a rate cut.
  • China's Housing Ministry urged local governments to speed up purchases of unsold homes.
  • The Japanese government will consider raising the minimum wage next week.
  • Bank Indonesia left its policy rate at 6.25%, as expected.
  • French Finance Minister Le Maire said that the promise to reduce public spending should not be underestimated.
  • Japan's May National CPI was up 0.5% m/m (last 0.4%), rising 2.8% yr/yr (last 2.5%). May National Core CPI was up 2.5% yr/yr (expected 2.6%; last 2.2%). Flash June Manufacturing PMI hit 50.1 (expected 50.6; last 50.4) and flash Services PMI hit 49.8 (last 53.8).
  • South Korea's May PPI was up 0.1% m/m (last 0.3%), rising 2.3% yr/yr (last 1.9%).
  • India's flash June Manufacturing PMI hit 58.5 (last 57.5) and flash Services PMI hit 60.4 (expected 60.0; last 60.2).
  • Hong Kong's May CPI was down 0.2% m/m (last -0.7%) but up 1.2% yr/yr (expected 1.3%; last 1.1%).
  • Australia's flash June Manufacturing PMI hit 47.5 (last 49.7) and flash Services PMI hit 50.6 (last 52.5).
  • Eurozone's flash June Manufacturing PMI hit 45.6 (expected 48.0; last 47.3) and flash Services PMI hit 52.6 (expected 53.5; last 53.2).
  • U.K.'s May Retail Sales grew 2.9% m/m (expected 1.6%; last -1.8%), increasing 1.3% yr/yr (expected -0.9%; last -2.3%). May Core Retail Sales rose 2.9% m/m (expected 1.3%; last -1.4%), increasing 1.2% yr/yr (expected -0.8%; last -2.5%). May Public Sector Net Borrowing reached GBP14.10 bln (expected GBP14.50 bln; last GBP17.52 bln). Flash June Manufacturing PMI hit 51.4 (expected 51.3; last 51.2) and flash Services PMI hit 51.2 (expected 53.0; last 52.9).
  • Germany's flash June Manufacturing PMI hit 43.4 (expected 46.4; last 45.4) and flash Services PMI hit 53.5 (expected 54.4; last 54.2).
  • France's June Business Survey remained at 99 (expected 100). Flash June Manufacturing PMI hit 45.3 (expected 46.8; last 46.4) and flash Services PMI hit 48.8 (expected 50.0; last 49.3).
• Commodities:
  • WTI Crude: +0.7% to $82.17/bbl
  • Gold: +0.5% to $2379.80/ozt
  • Copper: -1.4% to $4.50/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0691
  • GBP/USD: -0.1% to 1.2646
  • USD/CNH: UNCH at 7.2869
  • USD/JPY: UNCH at 158.90
• Data out Today:
  • 9:45 ET: Flash June S&P Global U.S. Manufacturing PMI (prior 51.3) and flash June S&P Global U.S. Services PMI (prior 54.8)
  • 10:00 ET: May Existing Home Sales (Briefing.com consensus 4.10 mln; prior 4.14 mln) and May Leading Indicators (Briefing.com consensus -0.3%; prior -0.6%)
  • 10:30 ET: Weekly natural gas inventories (prior +75 bcf)