Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a slightly lower start after a night of sideways action in the futures market. Treasury futures marked lows at the start of the Asian session, followed by a sideways drift just above those levels. The slight pressure took place alongside mild selling in other sovereign debt while global equity markets have shown some general weakness. Sweden's Riksbank left its policy rate at 3.75% and hinted at as many as three rate cuts during the second half. The U.S. session will feature a full slate of data, including the third estimate of Q1 GDP (Briefing.com consensus 1.3%; prior 1.3%) at 8:30 ET. Later in the day, the U.S. Treasury will sell $44 bln in 7-yr notes. Crude oil holds a modest gain while the U.S. Dollar Index is down 0.1% at 105.91.
• Yield Check:
  • 2-yr: +1 bp to 4.76%
  • 3-yr: +1 bp to 4.54%
  • 5-yr: +1 bp to 4.35%
  • 10-yr: +1 bp to 4.33%
  • 30-yr: +1 bp to 4.46%

• News:
  • The Federal Reserve announced yesterday afternoon that all 31 banks that were subject to a stress test passed.
  • The EU made a slight reduction to tariffs on imports of Chinese electric vehicles.
  • China's cabinet is looking to attract more foreign investment.
  • Down payments for first-time homebuyers in Beijing have been lowered to 20% from 30%.
  • Toyota's global output was down 4.1% in May, representing the fourth consecutive monthly decrease.
  • The U.S., Japan, and South Korea have agreed to closer cooperation on key technologies, export controls, and supply chains.
  • Retailer H&M said that June sales are expected to be down about 6% yr/yr while German engineering firm Manz lowered its outlook due to weak investment spending.
  • China's May Industrial Profit was up 3.4% YTD (last 4.3%).
  • Japan's May Retail Sales were up 3.0% yr/yr (expected 2.0%; last 2.0%).
  • South Korea's July Manufacturing BSI Index rose to 78 from 74.
  • Australia's MI Inflation Expectations accelerated to 4.4% from 4.1%.
  • New Zealand's June ANZ Business Confidence fell to 6.1 from 11.2.
  • Eurozone's May M3 Money Supply was up 1.6% yr/yr (expected 1.5%; last 1.3%). May loans to nonfinancials rose 0.3% yr/yr (last 0.3%) and Private Sector Loans also rose 0.3% yr/yr, as expected (last 0.2%). June Business and Consumer Survey fell to 95.9 from 96.1 (expected 96.2).
  • Italy's June Business Confidence fell to 86.8 from 88.2 (expected 88.7) and Consumer Confidence rose to 98.3 from 96.4 (expected 97.0). May PPI was up 0.3% m/m (last -0.7%) but down 3.5% yr/yr (last -1.4%).
  • Spain's May Retail Sales rose 0.2% yr/yr (last 0.3%).
• Commodities:
  • WTI Crude: +0.6% to $81.41/bbl
  • Gold: +0.6% to $2326.20/ozt
  • Copper: -0.7% to $4.339/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0696
  • GBP/USD: +0.2% to 1.2643
  • USD/CNH: UNCH at 7.2986
  • USD/JPY: -0.2% to 160.48
• Data out Today:
  • 8:30 ET: May advance goods trade balance (prior -$99.4 bln), advance Retail Inventories (prior 0.7%), advance Wholesale Inventories (prior 0.2%), weekly Initial Claims (Briefing.com consensus 238,000; prior 238,000), Continuing Claims (prior 1.828 mln), May Durable Orders (Briefing.com consensus -1.2%; prior 0.7%), Durable Orders ex-transportation (Briefing.com consensus 0.2%; prior 0.4%), Q1 GDP -- third estimate (Briefing.com consensus 1.3%; prior 1.3%), and Q1 GDP Deflator -- third estimate (Briefing.com consensus 3.1%; prior 3.0%)
  • 10:00 ET: May Pending Home Sales (Briefing.com consensus 2.3%; prior -7.7%)
  • 10:30 ET: Weekly natural gas inventories (prior +71 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results