Bond Market Update

Longer Tenors Defend Starting Gains

• U.S. Treasuries began the week on a mostly higher note, as longer tenors held onto roughly half of their opening gains while shorter tenors returned to little changed in morning action. Treasuries got off to a higher start to a week that will feature the July FOMC Statement, the July Employment Situation report (Briefing.com consensus 170,000; prior 206,000), and the release of quarterly reports from nearly 200 S&P 500 components. The Treasury complex spent the first hour of action in a sideways range, facing some pressure alongside a higher open on Wall Street. That pressure eventually returned the 2-yr note to its flat line, where it remained into the close, while 10s and 30s found support near the midpoint of today's range, hanging onto a portion of their gains into the close. The U.S. Treasury announced after the close that it expects to borrow $740 bln in Q3, $106 bln less than anticipated in April. Q4 borrowing is expected to reach $565 bln. Crude oil fell to a fresh low for the month while the U.S. Dollar Index rose 0.2% to 104.55.
• Yield Check:
  • 2-yr: UNCH at 4.39%
  • 3-yr: UNCH at 4.20%
  • 5-yr: -1 bp to 4.07%
  • 10-yr: -2 bps to 4.18%
  • 30-yr: -2 bps to 4.43%
• News:
  • A weekend presidential election in Venezuela resulted in both sides claiming a win.
  • The Chinese government launched a program to support the development of small and medium-sized technology firms.
  • The Bank of England will meet this week and the market's expectations are leaning toward a rate cut.
  • China's June Industrial Profit was up 3.5% YTD (last 3.4%).
  • U.K.'s June BoE Consumer Credit reached GBP1.162 bln (last GBP1.494 bln), June Mortgage Approvals hit 59,980 (expected 60,000; last 60,130), June Mortgage Lending reached GBP2.65 bln (last GBP1.26 bln), and June Net Lending to Individuals reached GBP3.816 bln (expected GBP2.200 bln; last GBP2.800 bln). July CBI Distributive Trades Survey fell to -43 from -24 (expected -20).
  • Italy's June non-EU trade surplus reached EUR6.04 bln (last EUR5.91 bln).
• Commodities:
  • WTI crude: -1.7% to $75.79/bbl
  • Gold: -0.2% to $2377.50/ozt
  • Copper: -0.7% to $4.08/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0823
  • GBP/USD: UNCH at 1.2864
  • USD/CNH: +0.1% to 7.2712
  • USD/JPY: +0.2% to 153.99
• The Day Ahead:
  • 9:00 ET: May FHFA Housing Price Index (prior 0.2%) and May S&P Case-Shiller Home Price Index (Briefing.com consensus 6.8%; prior 7.2%)
  • 10:00 ET: July Consumer Confidence (Briefing.com consensus 99.8; prior 100.4)