Bond Market Update

Tough day for the Dollar

• U.S. Treasuries meandered their way through a relatively quiet session that saw the back end outperform the front end without a lot of conviction on either front. Participants largely adopted a wait-and-see mindset in front of several key events later in the week: benchmark revisions for nonfarm payrolls for April 2023-March 2024 (Wednesday), the FOMC Minutes for the July 30-31 meeting (Wednesday), and Fed Chair Powell's speech on the Economic Outlook at the Jackson Hole Economic Symposium (Friday). While Treasuries held their own, it was a tough day for the dollar, which lost ground against the euro, the yen, and the British pound. The weakness in the greenback was captured in a 0.6% decline for the U.S. Dollar Index to 101.88, which is the lowest level since Jan. 2.
• Yield Check:
  • 2-yr: +1 bp to 4.07%
  • 3-yr: unch at 3.87%
  • 5-yr: -1 bp to 3.76%
  • 10-yr: -2 bps to 3.87%
  • 30-yr: -3 bps to 4.12%

• News:
  • Democratic National Convention begins today in Chicago
  • San Francisco Fed President Mary Daly (FOMC voter) in interview says Fed should gradually reduce rates, according to FT
  • Minneapolis Fed President Neel Kashkari (non-FOMC voter) in interview says a weaker employment market could trigger Fed rate cut, according to The Wall Street Journal
  • Goldman Sachs economists lower US recession expectations over the next 12 months to 20% from 25%, according to Bloomberg
  • US confident in ceasefire proposal, but Hamas is expected to reject the "bridging proposal," according to Politico
  • Israel Prime Minister Benjamin Netanyahu accepted terms of bridge proposal in ceasefire talks, but Hamas thinks the proposal favors Israel too much, according to NY Times
  • BHP (BHP) workers have accepted proposal and strike at Chile mine has ended, according to Bloomberg
  • Potential Canadian railway strike this week could impact supply chains, according to CBS News
  • Japan's June Core Machinery Orders 2.1% m/m (expected 0.9%; last -3.2%) and -1.7% yr/yr (expected 1.8%; last 10.8%)
• Today's Data:
  • The Conference Board's Leading Economic Indicators for July declined 0.6% (Briefing.com consensus -0.3%) following a 0.2% decline in June. July marked the 29th consecutive month that the Leading Economic Indicators has failed to produce a positive number.
    • The downturn in July was driven by widespread weakness in non-financial components, but the key takeaway from the report is that the six-month annual growth rate no longer signals a recession ahead, according to the Conference Board.
• Commodities: 
  • WTI crude: -2.3% to $73.77/bbl
  • Gold: +0.1% to $2540.20/ozt 
  • Copper: +0.7% to $4.18/lb
• Currencies:
  • EUR/USD: +0.5% to 1.1080
  • GBP/USD: +0.4% to 1.2990
  • USD/CNH: -0.5% to 7.1301
  • USD/JPY: -0.6% to 146.66
• The Day Ahead:
  • There is no economic data of note