Bond Market Update

Pulling Back

• U.S. Treasuries are on track for a lower start in most tenors while the 2-yr note is expected to open closer to its flat line. Treasury futures began facing pressure in the early evening, continuing their retreat into the night. The selling abated during the past two hours, though Treasuries have remained near their overnight lows. Once again, the night was fairly quiet on the data front, but the market has seen some shifts in rate expectations. Australia's CPI accelerated to 4.0% yr/yr in May, leading to renewed speculation about a potential August rate hike from the Reserve Bank of Australia while comments from European Central Bank policymaker Rehn have increased hopes for a rate cut in July. The U.S. session will see the release of May New Home Sales (Briefing.com consensus 650,000; prior 634,000) at 10:00 ET and the U.S. Treasury will follow yesterday's strong 2-yr note sale with a $70 bln 5-yr note offering at 13:00 ET. Crude oil is on the rise while the U.S. Dollar Index is up 0.3% at 105.95.
• Yield Check:
  • 2-yr: UNCH at 4.73%
  • 3-yr: +5 bps to 4.51%
  • 5-yr: +6 bps to 4.32%
  • 10-yr: +5 bps to 4.29%
  • 30-yr: +5 bps to 4.42%

• News: 
  • The Bank of Japan will reportedly consider hiking rates at all upcoming meetings, including the one scheduled for July. The central bank is expected to announce a reduction to its monthly purchases.
  • China's 10-yr yield has slipped back toward its low from late April in the 2.20% area.
  • South Korea's finance minister expects that exports will return to record levels imminently.
  • Outgoing Dutch Prime Minister Rutte will be the next secretary general of NATO, as expected.
  • European Central Bank policymaker Rehn said that rate changes are a possibility at every upcoming ECB meeting, which has raised hopes for another rate cut in July.
  • The ECB has reportedly started the review of its monetary policy strategy, which will be publicized in the second half of 2025.
  • Australia's May MI Leading Index was unchanged m/m (last 0.0%) and May CPI Indicator accelerated to 4.0% yr/yr from 3.6% (expected 3.8%).
  • Singapore's May Industrial Production was up 1.1% m/m (expected 1.8%; last 7.5%), rising 2.9% yr/yr (expected 2.0%; last -1.2%).
  • Germany's July GfK Consumer Climate fell to -21.8 from -21.0 (expected -19.4).
  • U.K.'s June CBI Distributive Trades Survey fell to -24 from 8 (expected 1).
  • France's June Consumer Confidence fell to 89 from 90, as expected. May jobseeker total increased to 2.816 mln from 2.775 mln.
  • Swiss June ZEW Expectations fell to 17.5 from 18.2.
• Commodities:
  • WTI Crude: +0.6% to $81.30/bbl
  • Gold: -0.3% to $2324.30/ozt
  • Copper: -0.4% to $4.361/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0691
  • GBP/USD: -0.2% to 1.2660
  • USD/CNH: +0.2% to 7.3003
  • USD/JPY: +0.4% to 160.33
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 0.8%; 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