Bond Market Update

Mixed Start Ahead

• U.S. Treasuries are on track for a modestly lower start in shorter tenors while the long bond is expected to show some relative strength in the early going. Treasury futures dipped during the latter portion of the Asian session before reclaiming the bulk of their slim losses as the night went on. Overnight action brought the release of final Services PMI readings for June with China's Caixin Services PMI (51.2) showing slower than expected growth while readings from India (60.5) and Australia (51.2) exceeded expectations. Japan's services sector (49.4) contracted for the first time in nearly two years. In Europe, Services PMI readings from Spain (56.8), Italy (53.7), Germany (53.1), and the U.K. (52.1) reflected ongoing growth while France's Services PMI (49.6) remained in contractionary territory. The U.S. session will feature a full slate of data ahead of the Treasury market's early close at 14:00 ET. The equity market, meanwhile, will close at 13:00 ET. Crude oil is little changed while the U.S. Dollar Index is down 0.1% at 105.62.
• Yield Check:
  • 2-yr: +3 bps to 4.77%
  • 3-yr: +2 bps to 4.57%
  • 5-yr: UNCH at 4.40%
  • 10-yr: -1 bp to 4.43%
  • 30-yr: -2 bps to 4.59%

• News:
  • Leaders from China and Türkiye met with Russian President Putin in Kazakhstan today.
  • South Korea's finance ministry raised its domestic growth forecast for the year to 2.6% from 2.2%.
  • The U.K.'s snap election will take place tomorrow with the ruling Conservative party expected to be dealt a major defeat.
  • Sweden's Riksbank expects two or three rate cuts in the second half, according to the policy Minutes from the June meeting.
  • China's June Caixin Services PMI hit 51.2 (expected 53.4; last 54.0).
  • Japan's June Services PMI hit 49.4 (expected 49.8; last 53.8).
  • India's June Services PMI hit 60.5 (expected 60.4; last 60.2).
  • Australia's June AIG Construction Index improved to -23.2 from -68.1 and AIG Manufacturing Index rose to -26.5 from -31.1. June Services PMI hit 51.2 (expected 50.6; last 52.5). May Building Approvals were up 5.5% m/m (expected 1.5%; last 1.9%), rising 15.0% yr/yr (last 28.1%). May Private House Approvals increased 2.1% m/m (last -0.3%) and May Retail Sales grew 0.6% m/m (expected 0.3%; last 0.1%).
  • Eurozone's June Services PMI hit 52.8 (expected 52.6; last 53.2). May PPI was down 0.2% m/m (expected -0.1%; last -1.0%), falling 4.2% yr/yr (expected -4.1%; last -5.7%).
  • Germany's June Services PMI hit 53.1 (expected 53.5; last 54.2). · U.K.'s June Services PMI hit 52.1 (expected 51.2; last 52.9).
  • France's May government budget deficit reached EUR113.5 bln (last deficit of EUR91.6 bln). June Services PMI hit 49.6 (expected 48.8; last 49.3).
  • Italy's June Services PMI hit 53.7 (expected 53.9; last 54.2).
  • Spain's June Services PMI hit 56.8 (expected 56.5; last 56.9).
• Commodities:
  • WTI Crude: +0.1% to $82.88/bbl
  • Gold: +0.9% to $2353.50/ozt
  • Copper: +1.8% to $4.497/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0758
  • GBP/USD: +0.2% to 1.2706
  • USD/CNH: UNCH at 7.3062
  • USD/JPY: +0.3% to 161.91
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -2.6%; prior 0.8%)
  • 8:15 ET: June ADP Employment Change (Briefing.com consensus 163,000; prior 152,000)
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 235,000; prior 233,000), Continuing Claims (prior 1.839 mln), and May Trade Balance (Briefing.com consensus -$76.0 bln; prior -$74.6 bln)
  • 9:45 ET: S&P Global U.S. Services PMI (prior 55.1)
  • 10:00 ET: June ISM Non-Manufacturing Index (Briefing.com consensus 52.5%; prior 53.8%) and May Factory Orders (Briefing.com consensus 0.3%; prior 0.7%)
  • 10:30 ET: Weekly crude oil inventories (prior +3.59 mln)
  • 12:00 ET: Weekly natural gas inventories (prior +52 bcf)
  • 14:00 ET: June FOMC Minutes