Bond Market Update

Data Recon

• U.S. Treasuries are holding up well even though the PPI report for June showed hotter than expected headline (0.2%; Briefing.com consensus 0.1%) and core PPI (0.4%; Briefing.com consensus 0.1%). Treasuries slipped from their initial levels in immediate reaction to the report, but a steady bounce has lifted 5s and shorter tenors to new highs while the long end is back to levels seen just before the report crossed the wires.
• The Producer Price Index for final demand increased 0.2% month-over-month in June (Briefing.com consensus 0.1%) following a revised no change in May (from -0.2%). The index for final demand, less food and energy ("core PPI"), was up 0.4% month-over-month (Briefing.com consensus 0.1%) after a revised 0.3% increase (from 0.0%) in May. On a year-over-year basis, the index for final demand was up 2.6% versus 2.2% in May, and the index for final demand, less food and energy, was up 3.0%, versus 2.3% in May.
  • The key takeaway from the report is that the year-over-year rate for PPI and core PPI accelerated for the fifth month out of the last six with rising prices of services outweighing falling prices of goods in June.
• Yield Check:
  • 2-yr: -3 bps to 4.48%
  • 3-yr: -2 bps to 4.25%
  • 5-yr: UNCH at 4.12%
  • 10-yr: UNCH at 4.20%
  • 30-yr: +1 bp to 4.41%