Bond Market Update

Soft CPI Sends Treasuries Past June Highs

• U.S. Treasuries have enjoyed a strong bid in the wake of the cooler-than-expected CPI report for June, which showed slight month-over-month deflation (-0.1%; Briefing.com consensus 0.1%) and a deceleration in the year-over-year growth rate to 3.0% from 3.3%. Shorter tenors were at the forefront of the rally in immediate reaction to the report, but 10s and 30s have risen to fresh highs in recent action while the 2-yr note remains a bit below its morning high. Today's rally has sent yields on 10s and shorter tenors to levels last seen in the middle of March while the 30-yr yield remains five basis points above its low from June (4.332%). The S&P 500 (+0.1%) started the day on a flat note as weakness in technology offsets gains in most other sectors, while small caps have shown early strength, sending the Russell 2000 higher by 1.9% toward its high from May.
• Yield Check:
  • 2-yr: -12 bps to 4.51%
  • 3-yr: -12 bps to 4.27%
  • 5-yr: -12 bps to 4.12%
  • 10-yr: -10 bps to 4.18%
  • 30-yr: -9 bps to 4.39%