Bond Market Update

Treasuries Reach July Highs Ahead of FOMC Statement

• U.S. Treasuries climbed on Tuesday, sending yields on 10s and shorter tenors to fresh closing lows for the month ahead of tomorrow's release of the latest FOMC Statement, which is expected to set the stage for a rate cut in September. Treasuries faced some light pressure after a flat open, hitting lows after the Consumer Confidence report for July (100.3; Briefing.com consensus 99.8) beat expectations, but the market showed resilience, rallying off mid-morning lows alongside selling in equities. The bounce continued into the early afternoon with Treasuries lurching to highs amid reports that Israel carried out an air strike outside of Lebanon's capital. Treasuries remained near their highs during the final couple hours of action, leaving yields on most tenors at fresh closing lows for the month leading into tomorrow's release of policy statements from the Bank of Japan and the Federal Reserve. Crude oil fell toward its June low (72.48) while the U.S. Dollar Index was little changed at 104.56.
• Yield Check:
  • 2-yr: -3 bps to 4.36%
  • 3-yr: -3 bps to 4.17%
  • 5-yr: -3 bps to 4.04%
  • 10-yr: -4 bps to 4.14%
  • 30-yr: -3 bps to 4.40%

• News:
  • The Bank of Japan will release its latest policy statement overnight and there is still some speculation that a rate hike and a plan to reduce bond purchases could be announced.
  • Japan's Economic Council called on the Bank of Japan and the government to be mindful of yen weakness when guiding policy.
  • Citigroup lowered its 2024 growth forecast for China to 4.8% from 5.0%.
  • British Chancellor Reeves said that she is planning GBP5.5 bln worth of spending cuts to narrow a budget gap.
  • China's June FDI was down 29.1% YTD (last -28.2%).
  • Japan's June Unemployment Rate dipped to 2.5% from 2.6% (expected 2.6%) and jobs/applications ratio fell to 1.23 from 1.24 (expected 1.24).
  • Australia's June Building Approvals decreased 6.5% m/m (expected -2.1%; last 5.7%) but were up 9.8% yr/yr (last 15.0%). June Private House Approvals fell 0.5% m/m (last 1.9%).
  • Eurozone's flash Q2 GDP expanded 0.3% qtr/qtr (expected 0.2%; last 0.3%), growing 0.6% yr/yr, as expected (last 0.4%). July Business and Consumer Survey dipped to 95.8 from 95.9 (expected 95.4).
  • Germany's flash Q2 GDP contracted 0.1% qtr/qtr (expected 0.1%; last 0.2%), decreasing 0.1% yr/yr (expected 0.0%; last -0.2%). Flash July CPI was up 0.3% m/m, as expected (last 0.1%), rising 2.3% yr/yr (expected 2.2%; last 2.2%).
  • France's flash Q2 GDP expanded 0.3% qtr/qtr (expected 0.2%; last 0.3%), growing 1.1% yr/yr (last 1.5%). June Consumer Spending was down 0.5% m/m (expected -0.2%; last 0.8%).
  • Italy's Q2 GDP expanded 0.2% qtr/qtr, as expected (last 0.3%), growing 0.9% yr/yr (expected 0.8%; last 0.6%). 
  • Spain's flash Q2 GDP expanded 0.8% qtr/qtr (expected 0.5%: last 0.8%). July CPI was down 0.5% m/m (last 0.4%) but up 2.8% yr/yr (expected 3.0%; last 3.4%). July Core CPI was up 2.8% yr/yr (last 3.0%). July Business Confidence ticked up to -4.2 from -5.7.
  • Swiss July KOF Leading Indicators fell to 101.0 from 102.7 (expected 102.6).
• Today's Data:
  • The Conference Board's Consumer Confidence Index improved to 100.3 in July (Briefing.com consensus 99.8) from a downwardly revised 97.8 (from 100.4) in June, with an improved short-term outlook driving the uptick.
    • The key takeaway from the report is that consumers are starting to take notice of slowing labor market conditions, yet their overall assessment of the current labor market situation is still quite strong.
  • The S&P Case-Shiller Home Price Index was up 6.8% in May (Briefing.com consensus 6.8%) after increasing a revised 7.3% (from 7.2%) in April.
  • The FHFA Housing Price Index was unchanged in May after increasing a revised 0.3% (from 0.2%) in April.
  • Job openings decreased to 8.184 million in June from a revised 8.230 million (from 8.140 million) in May.
• Commodities:
  • WTI crude: -1.4% to $74.73/bbl
  • Gold: +1.1% to $2451.80/ozt
  • Copper: +0.2% to $4.09/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0811
  • GBP/USD: -0.2% to 1.2833
  • USD/CNH: -0.3% to 7.2512
  • USD/JPY: -0.5% to 153.21
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -2.2%)
  • 8:15 ET: July ADP Employment Change (Briefing.com consensus 160,000; prior 152,000)
  • 8:30 ET: Q2 Employment Cost Index (Briefing.com consensus 1.0%; prior 1.2%)
  • 10:00 ET: June Pending Home Sales (Briefing.com consensus 1.5%; prior -2.1%)
  • 10:30 ET: Weekly crude oil inventories (prior (-3.74 mln)
  • 14:00 ET: July FOMC Rate Decision (Briefing.com consensus 5.25-5.50%; prior 5.25-5.50%)