Bond Market Update

July Gains Trimmed

• U.S. Treasuries ended Thursday on a modestly lower note, dipping from their best levels of the month. The market saw some intraday volatility, but ultimately, Treasuries finished right where they started after expanding their opening range. The market followed its lower start with a brief bounce after the latest jobless claims report showed a sizable increase in initial claims (to 243,000 from 223,000; Briefing.com consensus 225,000). However, the post-data bounce quickly gave way to a slip to fresh lows before the market bounced again alongside a shaky open in equities. Treasuries reached fresh intraday highs around 10:30 ET, before a slow retreat into the afternoon that left yields back at their starting levels. Crude oil finished the day little changed after giving up an intraday gain while the U.S. Dollar Index rose 0.4% to 104.18.
• Yield Check:
  • 2-yr: +3 bps to 4.46%
  • 3-yr: +3 bps to 4.23%
  • 5-yr: +3 bps to 4.11%
  • 10-yr: +4 bps to 4.19%
  • 30-yr: +5 bps to 4.41%

• News:
  • Several top Democrats believe that President Biden will suspend his reelection campaign in the coming days, according to Axios.
  • Boeing workers in Seattle authorized a strike.
  • China's Communist party will host a media briefing tomorrow to summarize the Third Plenum, which concluded today. The party pledged to build a high-level socialist market economic system over the next ten years.
  • Former Bank of Japan director Hayakawa said that he does not expect a rate hike later this month.
  • EU Commission President von der Leyen shared a plan to build a "true European defense union" during her new five-year term.
  • Japan's June trade surplus reached JPY224.0 bln (expected deficit of JPY240.0 bln; last deficit of JPY1.22 trln) as imports grew 3.2% yr/yr (expected 9.3%; last 9.5%) and exports rose 5.4% yr/yr (expected 6.4%; last 13.5%).
  • Hong Kong's June Unemployment Rate remained at 3.0%.
  • Australia's June Employment increased by 50,200 (expected 19,900; last 39,500) and full employment increased by 43,300 (last 41,300). June Unemployment Rate rose to 4.1% from 4.0%, as expected, and Participation Rate ticked up to 66.9% from 66.8% (expected 66.8%). NAB Quarterly Business Confidence rose to -1 from -2.
  • U.K.'s May Average Earnings Index + Bonus rose 5.7% yr/yr, as expected (last 5.9%). May three-month employment increased by 19,000 (expected 18,000; last -140,000), and May Unemployment Rate remained at 4.4%, as expected. June Claimant Count increased by 32,300 (expected 23,400; last 51,900).
  • Swiss June trade surplus reached CHF6.18 bln (expected surplus of CHF5.05 bln; last surplus of CHF5.79 bln).
• Today's Data:
  • Initial jobless claims for the week ending July 13 increased by 20,000 to 243,000 (Briefing.com consensus 225,000). Continuing jobless claims for the week ending July 6 also increased by 20,000 to 1.867 million, which is the highest level since November 27, 2021.
    • The key takeaway from the report is that it fits with the view that there is some softening in the labor market, which is a trend that will massage the market's belief that the Fed is likely to cut the target range for the fed funds rate before the end of the year.
  • The Philadelphia Fed Index for July jumped to 13.9 (Briefing.com consensus 2.9) from 1.3 in June as the indexes for shipments, new orders, and employment turned positive. A number above 0.0 for this series denotes an expansion in manufacturing activity in the Philadelphia Fed region.
    • The fact that this is survey data, though, as opposed to the hard data of jobless claims, diminishes its influence as a more convincing economic guidepost. The Fed, frankly, will be more interested in what it is seeing in the jobless claims data.
  • Conference Board's Leading Economic Index was down 0.2% in June (Briefing.com consensus -0.3%) after decreasing a revised 0.4% (from -0.5%) in May.
  • Weekly natural gas inventories increased by 10 bcf after increasing by 65 bcf a week ago.
• Commodities:
  • WTI crude: -0.2% to $81.31/bbl
  • Gold: -0.2% to $2456.50/ozt
  • Copper: -3.0% to $4.28/lb
• Currencies:
  • EUR/USD: -0.4% to 1.0895
  • GBP/USD: -0.5% to 1.2942
  • USD/CNH: +0.1% to 7.2772
  • USD/JPY: +0.8% to 157.36
• No Data on Tomorrow's Schedule