Bond Market Update

Short End Ahead

• U.S. Treasuries are on track for a higher start in shorter tenors while longer tenors are set to open closer to their unchanged levels. Treasury futures saw very little movement during the first few hours of the overnight session, followed by a rise that started as the focus began turning to Europe. Overall risk sentiment has been weakened by a poor reaction to quarterly results from Alphabet (GOOG) and Tesla (TSLA) and some ongoing weakness in PMI readings. Japan's Manufacturing PMI (49.2) fell into contraction in the flash reading for July while Services PMI (53.9) pointed to renewed expansion. Meanwhile, flash July Manufacturing (45.6) and Services PMI (51.9) readings for the eurozone weakened unexpectedly from their June levels, largely due to a deepening contraction in economic activity in Germany. Crude oil is rising off its lowest level since early June while the U.S. Dollar Index is down 0.1% at 104.32.
• Yield Check:
  • 2-yr: -6 bps to 4.42%
  • 3-yr: -2 bps to 4.24%
  • 5-yr: -2 bps to 4.13%
  • 10-yr: -1 bp to 4.23%
  • 30-yr: UNCH at 4.47%

• News:
  • French President Macron ruled out resigning before the end of his term in 2027.
  • Hungary's central bank lowered its base rate by 25 bps to 6.75%.
  • Deutsche Bank (DB) reported its first quarterly loss in four years.
  • Japan's flash July Manufacturing PMI hit 49.2 (expected 50.5; last 50.0) and flash Services PMI hit 53.9 (last 49.4).
  • South Korea's July Consumer Confidence rose to 103.6 from 100.9.
  • India's flash July Manufacturing PMI hit 58.5 (last 58.3) and flash Services PMI hit 61.1 (last 60.5).
  • Australia's flash July Manufacturing PMI hit 47.4 (last 47.2) and flash Services PMI hit 50.8 (last 51.2).
  • Eurozone's flash July Manufacturing PMI hit 45.6 (expected 46.0; last 45.8) and flash Services PMI hit 51.9 (expected 52.9; last 52.8). 
  • Germany's flash July Manufacturing PMI hit 42.6 (expected 44.1; last 43.5) and flash Services PMI hit 52.0 (expected 53.2; last 53.1). August GfK Consumer Climate improved to -18.4 from -21.6 (expected -21.1).
  • U.K.'s flash July Manufacturing PMI hit 51.8 (expected 51.1; last 50.9) and flash Services PMI hit 52.4 (expected 52.5; last 52.1).
  • France's flash July Manufacturing PMI hit 44.1 (expected 45.8; last 45.4) and flash Services PMI hit 50.7 (expected 49.7; last 49.6).
  • Spain's June PPI was down 3.5% yr/yr (last -4.5%) and June Consumer Confidence rose to 88.4 from 83.8.
• Commodities:
  • WTI Crude: +1.3% to $77.93/bbl
  • Gold: +0.4% to $2417.50/ozt
  • Copper: -0.1% to $4.155/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0846
  • GBP/USD: +0.1% to 1.2919
  • USD/CNH: UNCH at 7.2852
  • USD/JPY: -0.9% to 154.18
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -2.2%; prior 3.9%)
  • 8:30 ET: 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%)
  • 9:45 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)
  • 10:00 ET: June New Home Sales (Briefing.com consensus 640,000; prior 619,000)
  • 10:30 ET: Weekly crude oil inventories (prior -4.87 mln)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results