Bond Market Update

Longer Tenors Lead Early Weakness

• U.S. Treasuries are on track to begin the third quarter with losses across the curve. Treasury futures slumped out of the gate last evening, recovering their losses in steady fashion during the Asina session. However, the rebound met renewed selling in early morning action, which has returned futures to their lows from last evening. The market received a big batch of data to start the month with China's Manufacturing PMI (49.5) remaining in contraction while Non-Manufacturing PMI decelerated unexpectedly (50.5 from 51.1). Elsewhere, the eurozone's Manufacturing PMI (45.8) remained in contraction in June while Spain (52.3) reported continued expansion. The first round of parliamentary elections in France resulted in an expected strong showing for Marine Le Pen's National Rally, but the party appears short of winning absolute majority. The second round of the vote will take place on Sunday. Crude oil is starting July on a higher note while the U.S. Dollar Index is down 0.2% at 105.69.
• Yield Check:
  • 2-yr: +3 bps to 4.75%
  • 3-yr: +4 bps to 4.55%
  • 5-yr: +5 bps to 4.38%
  • 10-yr: +7 bps to 4.41%
  • 30-yr: +7 bps to 4.57%

• News:
  • Cleveland Fed President Mester's term ends today, and she will be replaced by Beth Hammack on August 31.
  • China's June Manufacturing PMI hit 49.5, as expected (last 49.5) and Non-Manufacturing PMI hit 50.5 (expected 51.1; last 51.1).
  • Japan's Q1 All Big Industry CAPEX was up 11.1% qtr/qtr (last 4.0%). Q2 Tankan Lare Manufacturers Index hit 13 (expected 11; last 11) and Big Manufacturers Index hit 14 (expected 13; last 10). Large Non-Manufacturers Index hit 27 (expected 31; last 27). June Manufacturing PMI hit 50.0 (expected 50.1; last 50.4). June Household Confidence improved to 36.4 from 36.2, as expected.
  • South Krea's June trade surplus reached $8.00 bln (expected surplus of $5.24 bln; last surplus of $4.86 bln) as imports fell 7.5% m/m (expected -2.2%; last -2.0%) and exports rose 5.1% yr/yr (expected 6.3%; last 11.7%). June Manufacturing PMI hit 52.0 (last 51.6).
  • India's June Manufacturing PMI hit 58.3 (expected 58.5; last 57.5).
  • Hong Kong's June Manufacturing PMI hit 51.8 (expected 51.5; last 51.7).
  • Singapore's Q2 URA Property Index was up 1.1% qtr/qtr (last 1.4%).
  • Australia's June Manufacturing PMI hit 47.2 (expected 47.5; last 49.7).
  • Eurozone's June Manufacturing PMI hit 45.8 (expected 45.6; last 47.3).
  • Germany's June Manufacturing PMI hit 43.5 (expected 43.4; last 45.4). June CPI was up 0.1% m/m (expected 0.2%; last 0.1%), rising 2.2% yr/yr (expected 2.3%; last 2.4%).
  • U.K.'s June Nationwide HPI was up 0.2% m/m (expected 0.0%; last 0.4%), rising 1.5% yr/yr (last 1.3%). June Manufacturing PMI hit 50.9 (expected 51.4; last 51.2). May Net Lending to Individuals reached GBP2.70 bln (expected GBP3.30 bln; last GBP3.10 bln).
  • France's June Manufacturing PMI hit 45.4 (expected 45.3; last 46.4).
  • Italy's June Manufacturing PMI hit 45.7 (expected 44.3; last 45.6).
  • Spain's June Manufacturing PMI hit 52.3 (expected 53.1; last 54.0).
  • Swiss May Retail Sales rose 0.4% yr/yr (expected 2.5%; last 2.2%). June procure.ch PMI hit 43.9 (last 46.4).
• Commodities:
  • WTI Crude: +0.6% to $82.00/bbl
  • Gold: +0.3% to $2346.60/ozt
  • Copper: +0.7% to $4.421/lb
• Currencies:
  • EUR/USD: +0.4% to 1.0749
  • GBP/USD: +0.3% to 1.2675
  • USD/CNH: UNCH at 7.2987
  • USD/JPY: +0.2% to 161.10
• Data out Today:
  • 9:45 ET: Final June S&P Global U.S. Manufacturing PMI (prior 51.7)
  • 10:00 ET: June ISM Manufacturing Index (Briefing.com consensus 49.1%; prior 48.7%) and May Construction Spending (Briefing.com consensus 0.1%; prior -0.1%)