Bond Market Update

Strong Week Turns Weak

• U.S. Treasuries extended Thursday's losses, finishing the week in negative territory after reversing from freshly set July highs. The market did not receive any economic data to end the week, but Treasuries were pressured from the start with shorter tenors leading the early weakness. The selling followed a night that saw weakness in most international equity and bond markets. There was also a widespread outage of essential computer systems after a faulty update from cybersecurity provider CrowdStrike (CRWD). Treasuries recorded the bulk of their losses at the start, marking intraday lows shortly after equities stumbled out of the gate. The rest of the session saw a sideways drift above lows and the starting levels of the day. Today's retreat resulted in a lower finish for the week just two days after Treasuries set fresh highs for the month. The slope of the yield curve saw no change with the 2s10s spread remaining at -27 bps. Crude oil slumped to its lowest level in over a month, falling past $80/bbl while the U.S. Dollar Index rose 0.2% to 104.38, returning to its 200-day moving average (104.39) and gaining 0.3% for the week that included a midweek slide to levels not seen in nearly four months.
• Yield Check:
  • 2-yr: +5 bps to 4.51% (+5 bps for the week)
  • 3-yr: +5 bps to 4.28% (+5 bps for the week)
  • 5-yr: +6 bps to 4.16% (+5 bps for the week)
  • 10-yr: +5 bps to 4.24% (+5 bps for the week)
  • 30-yr: +4 bps to 4.45% (+5 bps for the week)

• News:
  • President Biden repeated that he is staying in the presidential race.
  • Former President Trump formally accepted the Republican nomination for president last evening.
  • Auto parts supplier Autoliv (ALV) warned about weakening demand from its clients.
  • The Japanese government lowered its domestic growth forecast for FY24 to 0.9% from 1.3%.
  • Japan's Prime Minister Kishida said that caution is warranted over 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.
  • 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: -3.2% to $78.69/bbl
  • Gold: -2.3% to $2399.50/ozt
  • Copper: -0.9% to $4.24/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0880
  • GBP/USD: -0.3% to 1.2911
  • USD/CNH: +0.1% to 7.2852
  • USD/JPY: +0.1% to 157.51
• The Week Ahead:
  • Monday: Nothing of note
  • Tuesday: June Existing Home Sales (Briefing.com consensus 4.00 mln; prior 4.11 mln) at 10:00 ET and $69 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior 3.9%) at 7:00 ET; flash July S&P Global U.S. Manufacturing PMI (prior 51.6) and flash July S&P Global U.S. Services PMI (prior 55.3) at 9:45 ET; June New Home Sales (Briefing.com consensus 640,000; prior 619,000) at 10:00 ET; weekly crude oil inventories (prior -4.87 mln) at 10:30 ET; and $70 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: Advance Q2 GDP (Briefing.com consensus 1.9%; prior 1.4%), Advance Q2 GDP Deflator (Briefing.com consensus 2.6%; prior 3.1%), weekly Initial Claims (Briefing.com consensus 240,000; prior 243,000), Continuing Claims (prior 1.867 mln), June Durable Orders (Briefing.com consensus 0.4%; prior 0.1%), Durable Orders ex-transport (Briefing.com consensus 0.2%; prior -0.1%), advance June international goods trade balance (prior -$100.6 bln), Advance June Retail Inventories (prior 0.7%), and advance June Wholesale Inventories (prior 0.6%) at 8:30 ET; weekly natural gas inventories (prior +10 bcf) at 10:30 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
  • Friday: June Personal Income (Briefing.com consensus 0.4%; prior 0.5%), Personal Spending (Briefing.com consensus 0.3%; prior 0.2%), PCE Prices (Briefing.com consensus 0.1%; prior 0.0%), and core PCE Prices (Briefing.com consensus 0.2%; prior 0.1%) at 8:30 ET; and final July University of Michigan Consumer Sentiment (Briefing.com consensus 66.0; prior 66.0) at 10:00 ET