Bond Market Update

Rising Ahead of Q2 GDP

• U.S. Treasuries are on track for a higher start with the 2-yr note set to build on yesterday's outperformance while the long bond will look to recover the bulk of yesterday's loss. However, the market could experience some volatility when the advance reading of Q2 GDP (Briefing.com consensus 1.9%) crosses the wires at 8:30 ET. Treasury futures spent the overnight session in a steady advance that began in early evening action and continued into the early morning. There was ongoing speculation that the Bank of Japan will consider hiking rates at next week's policy meeting and could announce a plan to significantly reduce its asset purchases over the coming years. Meanwhile, the People's Bank of China headed in the opposite direction, unexpectedly lowering its medium-term lending facility rate by 20 basis points to 2.30%. Crude oil has slipped past its low from Tuesday while the U.S. Dollar Index is down 0.1% at 104.27.
• Yield Check:
  • 2-yr: -5 bps to 4.37%
  • 3-yr: -6 bps to 4.19%
  • 5-yr: -7 bps to 4.09%
  • 10-yr: -7 bps to 4.22%
  • 30-yr: -7 bps to 4.48%

• News:
  • German Chancellor Scholz indicated that he plans to run for another term in the fall.
  • Fintech company Revolut received a banking license in the U.K.
  • STMicroelectronics lowered its outlook due to weak pricing.
  • Stellantis reported weak results and said it is considering price cuts.
  • Japan's July Corporate Services Price Index was up 3.0% yr/yr (expected 2.6%; last 2.7%).
  • South Korea's Q2 GDP contracted 0.2% qtr/qtr (expected 0.1%; last 1.3%) but grew 2.3% yr/yr (expected 2.5%; last 3.3%).
  • Hong Kong's June trade deficit reached $55.7 bln (last deficit of $12.1 bln) as imports rose 9.0% m/m (last 9.6%) and exports rose 10.7% m/m (last 14.8%).
  • Eurozone's June M3 Money Supply grew 2.2% yr/yr (expected 1.9%; last 1.6%), Private Sector Loans rose 0.3% yr/yr (expected 0.5%; last 0.3%), and Loans to nonfinancials increased 0.7% (last 0.3%).
  • Germany's July ifo Business Climate Index hit 87.0 (expected 88.9; last 88.6). July Current Assessment fell to 87.1 from 88.3 (expected 88.5) and Business Expectations fell to 86.9 from 88.8 (expected 89.0).
  • U.K.'s July CBI Industrial Trends Orders fell to -32 from -18 (expected -19).
  • France's July Business Survey fell to 95 from 99 (expected 99).
• Commodities:
  • WTI Crude: -1.7% to $76.29/bbl
  • Gold: -1.9% to $2369.60/ozt
  • Copper: -0.7% to $4.079/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0846 
  • GBP/USD: -0.3% to 1.2872
  • USD/CNH: -0.6% to 7.2214
  • USD/JPY: -0.7% to 152.61
• Data out Today:
  • 8:30 ET: 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%), and Durable Orders ex-transport (Briefing.com consensus 0.2%; prior -0.1%)
  • 10:30 ET: Weekly natural gas inventories (prior +10 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results