Bond Market Update

Inching Higher

• U.S. Treasuries are on track for a modestly higher start after another night of limited movement in the futures market. Treasury futures faced some pressure in the early evening, hitting lows around the start of the Asian session. However, the rest of the night saw a steady rise that produced highs around 7:00 ET. The overnight news flow was light once again, but the market received China's latest inflation figures, which showed that CPI deflated slightly for the second month in a row largely due to falling food prices while PPI was down on a yr/yr basis for the 21st month in a row. Fed Chairman Powell will be back on Capitol Hill today to deliver the second part of his testimony on monetary policy to the House Financial Services Committee at 10:00 ET. Crude oil is down modestly while the U.S. Dollar Index is lower by 0.1% at 105.06.
• Yield Check:
  • 2-yr: -2 bps to 4.61%
  • 3-yr: -3 bps to 4.38%
  • 5-yr: -3 bps to 4.22%
  • 10-yr: -3 bps to 4.27%
  • 30-yr: -4 bps to 4.46%

• News:
  • Former Bank of Japan Governor Shirakawa said that the central bank needs to loosen the hard 2.0% inflation target.
  • The Reserve Bank of New Zealand left its official cash rate at 5.50%, as expected.
  • Samsung's unionized employees are threatening an indefinite strike.
  • Volkswagen lowered its sales forecast for the year due in part to a possible closure of an electric vehicle plant in Brussels while Mercedes-Benz reported a 6% decrease in Q2 vehicle sales.
  • Croatia's central bank governor and European Central Bank policymaker Vujcic is on track to be appointed to his third six-year term.
  • China's June CPI was down 0.2% m/m (expected -0.1%; last -0.1%) but up 0.2% yr/yr (expected 0.4%; last 0.3%). June PPI was down 0.8% yr/yr, as expected (last -1.4%).
  • Japan's June PPI was up 0.2% m/m (expected 0.4%; last 0.7%), rising 2.9% yr/yr, as expected (last 2.6%).
  • South Korea's June Unemployment Rate remained at 2.8%.
  • New Zealand's May Visitor Arrivals rose 4.0% m/m (last -8.8%).
  • Italy's May Industrial Production was up 0.5% m/m (expected 0.0%; last -1.0%) but down 3.3% yr/yr (last -3.0%).
• Commodities:
  • WTI Crude: -0.3% to $81.17/bbl
  • Gold: +0.7% to $2384.80/ozt
  • Copper: +0.5% to $4.599/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0824
  • GBP/USD: +0.2% to 1.2805
  • USD/CNH: +0.1% to 7.2910
  • USD/JPY: +0.1% to 161.47
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -0.2%; prior -2.6%)
  • 10:00 ET: May Wholesale Inventories (Briefing.com consensus 0.6%; prior 0.1%)
  • 10:30 ET: Weekly crude oil inventories (prior -12.16 mln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results