Bond Market Update

Pullback Deepens

• U.S. Treasuries started the week on a lower note, continuing their reversal from July highs. The trading day started with modest gains in 5s and longer tenors while the 2-yr note underperformed from the start. The mixed open followed a weekend that was light in terms of international data and news developments, but some additional political uncertainty was injected into the U.S. presidential race after President Biden announced that he will no longer run for another term and will endorse Vice President Harris. Treasuries spent the first couple hours in a sideways range with longer tenors eventually joining the short end in negative territory. Th market faced a wave of selling that drove 10s and 30s into the red around 11:00 ET, followed by a quiet drift just above lows into the close. Equities rebounded from last week's poor showing while crude oil fell toward its 50-day moving average (79.78). The U.S. Dollar Index slipped 0.1% to 104.33.
• Yield Check:
  • 2-yr: +1 bp to 4.52%
  • 3-yr: +2 bps to 4.30%
  • 5-yr: +2 bps to 4.18%
  • 10-yr: +2 bps to 4.26%
  • 30-yr: +3 bps to 4.48%

• News:
  • The British government will reportedly offer above-inflation pay hikes to teachers and nurses.
  • European Central Bank policymaker Kazimir said that there is potential for additional easing while policymaker Makhlouf said that there is no need to rush to make policy decisions.
  • Europe's top discount airline Ryanair missed quarterly expectations and issued soft guidance.
  • The Bank of Japan's Minutes from the bond market group meeting two weeks ago showed an agreement that the central bank should set and announce the sizes for its bond purchases for the next two years at the upcoming policy meeting.
  • Hong Kong' June CPI was up 0.5% m/m (last -0.2%), rising 1.5% yr/yr (last 1.2%).
  • New Zealand's June trade surplus reached $699 mln (expected surplus of $294 mln; last surplus of $54 mln).
• Commodities:
  • WTI crude: -0.3% to $78.43/bbl
  • Gold: -0.2% to $2394.40/ozt
  • Copper: -0.9% to $4.20/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0887
  • GBP/USD: +0.1% to 1.2923
  • USD/CNH: +0.2% to 7.2958
  • USD/JPY: -0.2% to 157.10
• The Day Ahead:
  • 10:00 ET: June Existing Home Sales (Briefing.com consensus 4.00 mln; prior 4.11 mln)
• Treasury Auctions: 
  • 13:00 ET: $69 bln 2-yr Treasury note auction results