Bond Market Update

Another Lower Start Ahead

• U.S. Treasuries are on track for a modestly lower start with shorter tenors expected to pace the early weakness. Treasury futures climbed in early evening action, but selling pressure appeared at the start of the Asian session, which saw additional weakness in most equity markets. China's Communist Party released a summary of this week's Third Plenum, but details were limited. However, the market hopes that more specific reform plans will emerge from the Politburo meeting at the end of this month. In Europe, a disappointing June Retail Sales (-1.2%; expected -0.6%) report from the U.K. has boosted expectations for an August rate cut from the Bank of England. There has also been some skepticism about the likelihood of a September rate cut from the European Central Bank. Crude oil is giving back some of its recent advance while the U.S. Dollar Index is up 0.1% at 104.28.
• Yield Check:
  • 2-yr: +3 bps to 4.49%
  • 3-yr: +2 bps to 4.25%
  • 5-yr: +2 bps to 4.13%
  • 10-yr: +2 bps to 4.21%
  • 30-yr: +1 bp to 4.42%

• News:
  • Former President Trump formally accepted the Republican nomination for president last evening.
  • The Japanese government lowered its domestic growth forecast for FY24 to 0.9% from 1.3%.
  • Japan's Prime Minister Kishida said that there needs to be caution about the effects of rising prices stemming from yen weakness.
  • Samsung's unionized employees are expected to resume wage talks with the company after eleven days on strike.
  • Appliance manufacturer Electrolux said that market conditions did not change much in Q2 with demand in North America remaining stable thanks to an aggressive pricing environment.
  • Japan's June National CPI was up 0.3% m/m (last 0.5%), rising 2.8% yr/yr (last 2.8%). June National Core CPI was up 2.6% yr/yr (expected 2.7%; last 2.5%).
  • New Zealand's June Credit Card Spending was down 3.1% yr/yr (last -0.2%).
  • Eurozone's May Current Account surplus reached EUR37.0 bln (expected surplus of EUR34.6 bln; last surplus of EUR38.6 bln).
  • Germany's June PPI was up 0.2% m/m (expected 0.1%; last 0.0%) but down 1.6% yr/yr, as expected (last -2.2%).
  • U.K.'s June Retail Sales were down 1.2% m/m (expected -0.6%; last 2.9%), falling 0.2% yr/yr (expected 0.2%; last 1.7%). Core Retail Sales were down 1.5% m/m (expected -0.5%; last 2.9%), falling 0.8% yr/yr (expected 0.2%; last 1.6%). June Public Sector Net Borrowing reached GBP13.59 bln (expected GBP10.80 bln; last GBP15.57 bln).
  • Spain's May trade deficit reached EUR2.30 bln (last deficit of EUR4.70 bln).
• Commodities:
  • WTI Crude: -0.5% to $82.41/bbl 
  • Gold: -1.7% to $2414.80/ozt
  • Copper: -0.8% to $4.247/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0892
  • GBP/USD: -0.1% to 1.2928
  • USD/CNH: +0.1% to 7.2809
  • USD/JPY: +0.1% to 157.43
• No Data on Today's Schedule