Bond Market Update

Rising Ahead of July CPI

• U.S. Treasuries are on track for a higher start ahead of the 8:30 ET release of July CPI (Briefing.com consensus 0.2%; prior -0.1%) and Core CPI (Briefing.com consensus 0.2%; prior 0.1%). Treasury futures spent the bulk of the night in a sideways range before rallying to highs during the past hour. The advance has taken place alongside a mostly positive showing from global equity markets. The overnight news flow picked up a bit, as Japan's Prime Minister Kishida said that he will not run in his party's leadership election in September while the Reserve Bank of New Zealand unexpectedly lowered its official cash rate by 25 bps to 5.25% and acknowledged that a 50-basis point cut was considered. Crude oil holds a modest loss while the U.S. Dollar Index is down 0.1% at 102.45.
• Yield Check:
  • 2-yr: -2 bps to 3.92%
  • 3-yr: -2 bps to 3.74%
  • 5-yr: -2 bps to 3.66%
  • 10-yr: -2 bps to 3.83%
  • 30-yr: -3 bps to 4.14%

• News:
  • China conducted a special 20-yr bond auction, which priced at a record low yield.
  • Travel company TUI noted a strong start to winter bookings for all markets.
  • Japan's August Reuters Tankan Index fell to 10 from 11.
  • South Korea's July Unemployment Rate fell to 2.5% from 2.8%.
  • India's July WPI Inflation hit 2.04% yr/yr (expected 2.39%; last 3.36%) and July trade deficit reached $23.50 bln (last deficit of $20.98 bln).
  • Eurozone's flash Q2 GDP expanded 0.3% qtr/qtr, as expected (last 0.3%), growing 0.6% yr/yr, as expected (last 0.4%). Q2 Employment was up 0.2% qtr/qtr, as expected (last 0.3%) increasing 0.8% yr/yr (last 1.0%). June Industrial Production was down 0.1% m/m (expected 0.4%; last -0.9%), falling 3.9% yr/yr (expected -2.9%; last -3.3%).
  • U.K.'s July CPI was down 0.2% m/m (last 0.1%) but up 2.2% yr/yr (expected 2.3%; last 2.0%). July Core CPI was up 0.1% m/m (last 0.2%), rising 3.3% yr/yr (expected 3.4%; last 3.5%). July Input PPI was down 0.1% m/m (expected -0.3%; last -0.4%) and Output PPI was unchanged m/m (expected 0.1%; last -0.7%). July House Price Index was up 2.7% yr/yr (expected 2.6%; last 2.2%).
  • France's July CPI was up 0.2% m/m (expected 0.1%; last 0.1%), rising 2.3% yr/yr, as expected (last 2.2%).
• Commodities:
  • WTI Crude: -0.1% to $78.26/bbl
  • Gold: +0.2% to $2513.40/ozt
  • Copper: +0.6% to $4.078/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1024 
  • GBP/USD: -0.1% to 1.2848
  • USD/CNH: -0.2% to 7.1336
  • USD/JPY: UNCH at 146.87
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 16.8%; prior 6.9%)
  • 8:30 ET: July CPI (Briefing.com consensus 0.2%; prior -0.1%) and Core CPI (Briefing.com consensus 0.2%; prior 0.1%)
  • 10:30 ET: Weekly crude oil inventories (prior -3.73 mln)