Bond Market Update

Longer Tenors Trim Recent Gains

• Longer-dated Treasuries began the week on a lower note, giving back some of their gains from last week's rally while the short end held steady after outperforming last week. The 5-yr note and longer tenors opened the day in negative territory after the weekend brought shocking news of an assassination attempt on former President Trump during a campaign stop in Pennsylvania. However, there was also a growing sense that he will win the election in November, paving the way for friendlier business conditions. The opening retreat was followed by a bounce that found some resistance once the 5-yr note made a brief appearance in the green while longer tenors remained behind, finding support near lows from Friday. Fed Chairman Powell appeared at a discussion at the Economic Club of Washington, but did not offer any additional clues about the central bank's initial rate cut plans. Crude oil recorded a slim loss while the U.S. Dollar Index rose 0.1% to 104.21.
• Yield Check:
  • 2-yr: -1 bp to 4.45%
  • 3-yr: UNCH at 4.23%
  • 5-yr: +2 bps to 4.13%
  • 10-yr: +4 bps to 4.23%
  • 30-yr: +5 bps to 4.45%

• News:
  • The leader of France's audit court said that the country's deficit level is unacceptable.
  • Bank of England policymaker Dhingra said that the time is right for starting the rate normalization process.
  • Luxury goods manufacturer Burberry forecast a loss for the first half of 2024.
  • Airbus raised its demand forecast for the year.
  • China's third plenum began today and will continue through Thursday, but expectations for major policy shifts are low.
  • China's June House Prices were down 4.5% yr/yr (last -3.9%). Q2 GDP expanded 0.7% qtr/qtr (expected 1.1%; last 1.5%), growing 4.7% yr/yr (expected 5.1%; last 5.3%). June Fixed Asset Investment rose 3.9% yr/yr, as expected (last 4.0%), June Industrial Production was up 5.3% yr/yr (expected 4.9%; last 5.6%), and June Retail Sales rose 2.0% yr/yr (expected 3.3%; last 3.7%). June Unemployment Rate remained at 5.0%, as expected.
  • South Korea's June trade surplus reached $7.99 bln (last surplus of $8.00 bln) as imports fell 7.5% yr/yr (last -7.5%) and exports rose 5.1% yr/yr (last 5.1%).
  • India's June trade deficit reached $20.98 bln (last deficit of $23.78 bln). June WPI Inflation was up 3.36% (expected 3.50%; last 2.61%).
  • Eurozone's May Industrial Production contracted 0.6% m/m (expected -0.9%; last -0.1%), falling 2.9% yr/yr (last -3.1%).
  • Swiss June PPI was unchanged m/m (expected 0.1%; last -0.3%), falling 1.9% yr/yr (last -1.8%).
• Today's Data:
  • The Empire State Manufacturing survey fell to -6.6 (Briefing.com consensus -6.0) in July from -6.0 in June.
• Commodities:
  • WTI crude: -0.3% to $81.95/bbl
  • Gold: +0.3% to $2428.10/ozt
  • Copper: -1.7% to $4.51/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0898
  • GBP/USD: -0.1% to 1.2969
  • USD/CNH: +0.1% to 7.2749
  • USD/JPY: +0.1% to 157.92
• The Day Ahead:
  • 8:30 ET: June Retail Sales (Briefing.com consensus -0.1%; prior 0.1%), Retail Sales ex-auto (Briefing.com consensus 0.2%; prior -0.1%), June Import Prices (prior -0.4%), Import Prices ex-oil (prior -0.3%), Export Prices (prior -0.6%), and Export Prices ex-agriculture (prior -0.8%)
  • 10:00 ET: May Business Inventories (Briefing.com consensus 0.3%; prior 0.3%) and July NAHB Housing Market Index (Briefing.com consensus 44; prior 43)