Bond Market Update

Long End Lags Ahead of PPI

• U.S. Treasuries are on track for a modestly lower start in longer tenors ahead of the 8:30 ET release of June PPI (Briefing.com consensus 0.1%; prior -0.2%) and Core PPI (Briefing.com consensus 0.1%; prior 0.0%), which will follow yesterday's cooler than expected June CPI (-0.1%; Briefing.com consensus 0.1%). Treasury futures faced some selling in early evening action, followed by a brief bounce that gave way to a return into the lower half of the overnight range. The market received a decent batch of economic data, including China's larger-than-expected trade surplus for June, though domestic demand was shy of expectations. Manufacturing activity in New Zealand contracted at its fastest pace since August 2021, according to the June Manufacturing PMI (41.1), while France's June CPI was a bit hotter than expected, coming in at 2.2% yr/yr (expected 2.1%). In the U.S., large banks have kicked off the Q2 reporting season with above-consensus results from JPMorgan Chase (JPM) and Wells Fargo (WFC). Crude oil is rising toward last week's high while the U.S. Dollar Index is down 0.1% at 104.32.
• Yield Check:
  • 2-yr: UNCH at 4.51%
  • 3-yr: +1 bp to 4.28%
  • 5-yr: +2 bps to 4.14%
  • 10-yr: +3 bps to 4.22%
  • 30-yr: +3 bps to 4.43%

• News:
  • Reserve Bank of India Governor Das said that inflation in June is expected around 5.0% and that it is too early to discuss rate cuts.
  • Reports from France suggest that left wing parties have not been able to agree on a candidate for prime minister.
  • There is some growing political uncertainty in Spain after Vox Party withdrew from five regional coalition governments with People's Party due to a dispute over migration.
  • Norwegian Air reported stronger than expected results for Q2.
  • Swiss nylon manufacturer EMS Chemie lowered its guidance for the year due to a strong franc and the lack of improvement in global manufacturing.
  • China's June trade surplus reached $99.05 bln (expected surplus of $85.10 bln; last surplus of $82.62 bln) as imports fell 2.3% yr/yr (expected 2.8%; last 1.8%) and exports rose 8.6% yr/yr (expected 8.0%; last 7.6%). June M2 Money Stock was up 6.2% yr/yr (expected 6.8%; last 7.0%), June New Loans totaled CNY2.13 trln (expected CNY1.05 trln; last CNY950.0 bln), and June total social financing reached CNY3.30 trln (last CNY2.07 trln). June FDI was down 29.1% YTD (last -28.2%).
  • Japan's May Industrial Production rose 3.6% m/m (expected 2.8%; last -0.9%) and Capacity Utilization was up 4.1% m/m (last 0.3%).
  • Singapore's Q2 GDP expanded 0.4% qtr/qtr (last 0.3%), growing 2.9% yr/yr (expected 2.7%; last 3.0%).
  • New Zealand's June Business NZ PMI hit 41.1 (last 47.2). June Electronic Card Retail Sales were down 0.6% m/m (last -1.2%), falling 4.9% yr/yr (last -1.6%).
  • Germany's June WPI was down 0.3% m/m (expected 0.2%; last 0.1%) but up 0.6% yr/yr (last -0.7%).
  • France's June CPI was up 0.1% m/m, as expected (last 0.0%), rising 2.2% yr/yr (expected 2.1%; last 2.3%).
  • Spain's June CPI was up 0.4% m/m (expected 0.3%; last 0.3%), rising 3.4% yr/yr, as expected (last 3.6%). Core CPI was up 3.0% yr/yr, as expected (last 3.0%).
• Commodities:
  • WTI Crude: +0.9% to $83.40/bbl
  • Gold: -0.7% to $2405.90/ozt
  • Copper: +0.8% to $4.54/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0890
  • GBP/USD: +0.4% to 1.2961
  • USD/CNH: +0.1% to 7.2704
  • USD/JPY: UNCH at 158.92
• Data out Today:
  • 8:30 ET: June PPI (Briefing.com consensus 0.1%; prior -0.2%) and Core PPI (Briefing.com consensus 0.1%; prior 0.0%)
  • 10:00 ET: Preliminary July University of Michigan Consumer Sentiment (Briefing.com consensus 67.5; prior 68.2)