Bond Market Update

Lower Start Ahead

• U.S. Treasuries are on course for a lower start after a slow retreat in the overnight futures market. Treasury futures began dipping last evening, finding some brief support shortly after the start of the Asian session. However, additional selling pressure in the early morning sent futures to fresh lows. The selling has taken place alongside a mixed, but generally steady, showing from other sovereign debt. The second round of French elections concluded with a surprising win for left-leaning parties after hundreds of candidates dropped out to strengthen support against Marine Le Pen's National Rally, which came in third place. This outcome is expected to lead to a deadlocked parliament. Crude oil is retracing a portion of last week's advance while the U.S. Dollar Index is up 0.1% at 104.96.
• Yield Check:
  • 2-yr: +3 bps to 4.63%
  • 3-yr: +3 bps to 4.42%
  • 5-yr: +4 bps to 4.26%
  • 10-yr: +4 bps to 4.31%
  • 30-yr: +3 bps to 4.50%

• News:
  • President Biden again ruled out ceding the Democratic presidential nomination over the weekend.
  • The Japanese government noted that pay hikes at companies with more than 30 employees exceeded inflation for the first time in 26 months and that base pay in May increased at a 21-year high of 2.5% yr/yr.
  • South Korean battery maker SK On said that it is in crisis due to weak demand for electric vehicles in Europe and the United States, according to FT.
  • China's gold purchase slowed significantly for the second month in a row in June after steady growth during the previous year.
  • The People's Bank of China released some details on its large-scale bond borrowing plan.
  • The Reserve Bank of New Zealand shadow board recommended that the RBNZ keep its official cash rate at 5.50% at this week's policy meeting.
  • Germany's Chemical Industry Association affirmed its outlook for the year.
  • New British Prime Minister Starmer named his cabinet.
  • Japan's May Average Cash Earnings rose 1.9% yr/yr (expected 2.1%; last 1.6%) and Overtime Pay increased 2.3% yr/yr (last -1.2%). May Current Account surplus reached JPY2.85 trln (expected JPY2.45 trln; last JPY2.05 trln). June Bank Lending was up 3.2% yr/yr (expected 3.1%; last 2.9%) and June Economy Watchers Current Index rose to 47.0 from 45.7 (expected 46.1).
  • Australia's May Home Loans were down 2.0% m/m (expected 2.0%; last 4.5%) and Invest Housing Finance was down 1.3% m/m (last 5.3%).
  • Eurozone's July Sentix Investor Confidence fell to -7.3 from 0.3 (expected -0.6).
  • Germany's May trade surplus reached EUR24.9 bln (expected EUR19.9 bln; last EUR22.2 bln) as imports fell 6.6% m/m (last 1.2%) and exports fell 3.6% m/m (last 1.7%).
• Commodities:
  • WTI Crude: -0.9% to $82.44/bbl
  • Gold: -0.6% to $2382.30/ozt
  • Copper: UNCH at $4.65/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0833
  • GBP/USD: +0.2% to 1.2832
  • USD/CNH: +0.1% to 7.2897
  • USD/JPY: +0.2% to 161.01
• Data out Today:
  • 15:00 ET: May Consumer Credit (Briefing.com consensus $9.5 bln; prior $6.4 bln)