Bond Market Update

Monday Slip Reversed

• U.S. Treasuries finished Tuesday with gains across the curve, reclaiming their losses from the start of the week. Longer-dated Treasuries outperformed from the start, but the entire complex faced some brief pressure after the release of the Retail Sales report for June (0.0%; Briefing.com consensus -0.1%), which beat expectations and included an upward revision to last month's reading. The post-data selling sent the 5-yr note and shorter tenors into the red while longer tenors found support before revisiting yesterday's closing levels. The 2-yr note remained in negative territory into the early afternoon while other tenors spent the rest of the day in a slow rise that eventually lifted 10s and 30s above their opening highs. Today's intraday bounce made for a continuation of the Treasury market's recent resilience, driving the 10-y yield to its lowest close in over four months. Crude oil slid past last week's low toward $80/bbl while the U.S. Dollar Index briefly rose past its 200-day moving average (104.42) before narrowing its gain to 0.1% at 104.27.
• Yield Check:
  • 2-yr: -1 bp to 4.44%
  • 3-yr: -2 bps to 4.21%
  • 5-yr: -4 bps to 4.09%
  • 10-yr: -6 bps to 4.17%
  • 30-yr: -8 bps to 4.37%

• News:
  • The Atlanta Fed's GDPNow forecast for Q2 GDP was revised up to 2.5% from 2.0% in the previous estimate.
  • The People's Bank of China conducted its largest liquidity injection on record, adding CNY733 bln through open market operations.
  • Chinese Insurer Ping An Insurance lost more than 5.0% in Hong Kong after issuing $3.5 bln wort of convertible notes.
  • Expectations for another rate hike rate from the Reserve Bank of Australia have receded significantly in recent weeks.
  • Roberta Metsola will continue leading the European Parliament for the next 2.5 years.
  • Hugo Boss lowered its outlook for the year due to weak sales in China and the United Kingdom.
  • Former President Trump selected Ohio Senator Vance as his running mate.
  • Japan's May Tertiary Industry Activity Index was down 0.4% m/m (expected 0.1%; last 2.2%).
  • South Korea's June Import Price Index was up 9.7% yr/yr (last 4.7%) and Export Price Index was up 12.2% yr/yr (last 7.6%).
  • Eurozone's May trade surplus reached EUR13.9 bln (expected surplus of EUR18.0 bln; last surplus of EUR14.2 bln). July ZEW Economic Sentiment fell to 43.7 from 51.3 (expected 48.1).
  • Germany's July ZEW Economic Sentiment fell to 41.8 from 47.5 (expected 41.2) and Current Conditions improved to -68.9 from -73.8 (expected -74.3).
  • France's May Current Account deficit reached EUR3.10 bln (last deficit of EUR3.50 bln).
  • Italy's June CPI was up 0.1% m/m, as expected (last 0.2%), rising 0.8% yr/yr, as expected (last 0.8%). May trade surplus reached EUR520 mln (last deficit of EUR210 mln).
• Today's Data:
  • Retail sales were flat in June (Briefing.com consensus -0.1%) following an upwardly revised 0.3% increase (from 0.1%) in May, pressured by a decline in auto sales related to the CDK Global cyberattack and lower gas prices. Excluding autos and gasoline, retail sales rose 0.8% month-over-month. Excluding autos, retail sales jumped 0.4% month-over-month (Briefing.com consensus 0.2%) after an upwardly revised 0.1% increase (from -0.1%) in May.
    • The key takeaway from the report is that it conveyed some rather solid levels of discretionary spending on goods in June that belies any hard landing tracking for the economy.
  • The NAHB Housing Market Index fell to 42 in July (Briefing.com consensus 44) from 43 in June.
  • Business Inventories were up 0.5% in May (Briefing.com consensus 0.3%) after increasing 0.3% in April.
  • Import prices were unchanged in June after decreasing a revised 0.2% (from -0.4%) in May. Excluding oil, import prices rose 0.2% after falling 0.3% in May. Export prices fell 0.5% in June after falling a revised 0.7% (from -0.6%) in May. Excluding agriculture, export prices fell 0.6% after decreasing 0.8% in May.
• Commodities:
  • WTI crude: -1.6% to $80.62/bbl
  • Gold: +1.6% to $2467.40/ozt
  • Copper: -1.1% to $4.46/lb
• Currencies:
  • EUR/USD: UNCH at 1.0896
  • GBP/USD: UNCH at 1.2969
  • USD/CNH: +0.2% to 7.2879
  • USD/JPY: +0.2% to 158.35
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -0.2%)
  • 8:30 ET: June Housing Starts (Briefing.com consensus 1.310 mln; prior 1.277 mln) and Building Permits (Briefing.com consensus 1.391 mln; prior 1.386 mln)
  • 9:15 ET: June Industrial Production (Briefing.com consensus 0.3%; prior 0.9%) and Capacity Utilization (Briefing.com consensus 78.6%; prior 78.7%)
  • 10:30 ET: Weekly crude oil inventories (prior -3.44 mln)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results