Bond Market Update

Solid Note Auction Ensures Higher Finish

• U.S. Treasuries endured another range-bound session on Tuesday, eking out slim gains in longer tenors while the 2-yr note finished flat. The long end outperformed from the start, opening the session with solid gains, but the market faced immediate pressure that returned all tenors back to little changed before the end of the initial hour of trade. Some additional intraday pressure sent Treasuries into negative territory, but they remained resilient, rising off lows after the U.S. Treasury kicked off this week's note auction slate with a solid sale of $69 bln in 2-yr notes. Economic data released today was headlined by the Consumer Confidence report for June (actual 100.4; Briefing.com consensus 100.0; prior 101.3), but the market's reaction to the slight beat was muted. Crude oil gave back some of yesterday's gain while the U.S. Dollar Index rose 0.1% to 105.61.
• Yield Check:
  • 2-yr: UNCH at 4.73%
  • 3-yr: -1 bp to 4.46%
  • 5-yr: -1 bp to 4.26%
  • 10-yr: -1 bp to 4.24%
  • 30-yr: -1 bp to 4.37%

• News:
  • Latest polls from France suggest that Marine Le Pen's party remains on track to gain about 36% of the vote in the first round while President Macron's party is polling around 20.5%.
  • The Chinese government is willing to offer perks to German carmakers to prevent the EU's planned implementation of tariffs on imported electric vehicles.
  • China's Premier Li expressed confidence that the domestic economy will grow about 5.0%.
  • Big Chinese telecom companies are reportedly being probed by the Biden administration.
  • Moody's does not expect Japan to reach its FY25 budget target.
  • Japan's June Corporate Price Services Index was up 2.5% yr/yr (expected 3.0%; last 2.7%). April BoJ Core CPI was up 2.1% yr/yr (expected 1.9%; last 1.8%). May Leading Index fell to 110.9 from 112.2 (expected 111.6) and Coincident Indicator was up 1.0% m/m, as expected (last 2.1%).
  • South Korea's June Consumer Confidence rose to 100.9 from 98.4.
  • Hong Kong's May trade deficit reached $12.1 bln (last deficit of $10.0 bln) as imports rose 9.6% m/m (last 3.7%) and exports increased 14.8% m/m (last 11.9%).
  • Australia's June Westpac Consumer Sentiment was up 1.7% (last -0.3%).
  • Spain's Q1 GDP expanded 0.8% qtr/qtr (expected 0.7%; last 0.7%), growing 2.5% yr/yr (expected 2.4%; last 2.4%). May PPI was down 4.6% yr/yr (last -6.7%).
• Today's Data:
  • The Conference Board's Consumer Confidence Index dropped to 100.4 in June (Briefing.com consensus 100.0) from a downwardly revised 101.3 (from 102.0) in May, with expectations weighing on the overall index.
    • The key takeaway from the report is that expectations for future income weakened. If that perception builds and/or is realized, then it is apt to detract from discretionary spending activity.
  • The FHFA Housing Price Index was up 0.2% m/m in April after increasing 0.1% in March.
  • The S&P Case-Shiller Home Price Index was up 7.2% yr/yr in April (Briefing.com consensus 6.9%) increasing an upwardly revised 7.5% (from 7.4%) in March.
  • $69 bln 2-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.706% (4.777%).
    • Bid-to-cover: 2.75 (2.66).
    • Indirect bid: 65.9% (63.8%).
    • Direct bid: 20.9% (20.7%).
• Commodities:
  • WTI crude: -1.0% to $80.81/bbl
  • Gold: -0.6% to $2330.70/ozt
  • Copper: -1.4% to $4.37/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0715
  • GBP/USD: +0.1% to 1.2692
  • USD/CNH: +0.1% to 7.2880
  • USD/JPY: UNCH at 159.63
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 0.9%)
  • 10:00 ET: May New Home Sales (Briefing.com consensus 650,000; prior 634,000)
  • 10:30 ET: Weekly crude oil inventories (prior -2.55 mln)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results