Bond Market Update

Subdued Start to New Week

• U.S. Treasuries began the week on a slightly lower note, though intraday action unfolded inside a narrow range. Treasuries climbed during the first hour of trade after a subdued night in overseas markets. The market did not receive any highly anticipated international economic reports, and the news flow was on the light side. In addition, a bank holiday in the U.K. contributed to reduced overall volume to start the week. Treasuries climbed during the opening hour but found resistance shortly after the long bond overtook its intraday high from Friday. The rest of the morning saw a pullback that established fresh lows before Treasuries nestled into a narrow range just below their unchanged levels. Economic data released this morning was limited to a larger than expected jump in Durable Orders in July (actual 9.9%; Briefing.com consensus 4.0%) fueled by a jump in transportation equipment orders, while nondefense capital spending was weak. Crude oil extended last week's rally off levels not seen since the start of the year with help from reports about a military confrontation between Israel and Hezbollah. The U.S. Dollar Index rose 0.2% to 100.88 after a brief slip to levels not seen in more than a year.
• Yield Check:
  • 2-yr: +2 bps to 3.93%
  • 3-yr: +1 bp to 3.74%
  • 5-yr: +1 bp to 3.66%
  • 10-yr: +1 bp to 3.82%
  • 30-yr: +1 bp to 4.11%

• News:
  • The Atlanta Fed's GDPNow forecast for Q3 GDP was left unrevised at 2.0% in the latest estimate.
  • The People's Bank of China left its medium-term lending facility rate at 2.30%, as expected.
  • Australia's Treasurer Chalmers will travel to China, marking the first visit by an Australian treasurer in seven years.
  • New Zealand's Prime Minister Luxon said that a ban on offshore oil and gas exploration will be reversed to deal with a domestic energy security crisis.
  • European Central Bank Chief Economist Lane said at the Jackson Hole Symposium that the return to the 2.0% inflation target is not yet secure.
  • Singapore's July Industrial Production was up 10.1% m/m (expected 5.3%; last -4.3%), rising 1.8% yr/yr (expected -1.1%; last -4.3%).
  • Germany's August ifo Business Climate Index hit 86.6 (expected 86.0; last 87.0). August Current Assessment fell to 86.5 from 87.1, as expected, and Business Expectations fell to 86.8 from 87.0 (expected 86.8).
  • Spain's July PPI was down 1.4% yr/yr (last -3.2%). · Swiss Q2 Employment rose to 5.499 mln from 5.481 mln.
• Today's Data:
  • Total new orders for durable goods surged 9.9% month-over-month in July (Briefing.com consensus 4.0%) following a downwardly revised 6.9% decline (from -6.6%) in June. That surge, like the downturn in June, was driven by transportation equipment orders, which soared 34.8%. Excluding transportation, durable goods orders declined 0.2% month-over-month (Briefing.com consensus 0.1%) following a downwardly revised 0.1% increase (from 0.5%) in June.
    • The key takeaway from the report is that business spending was soft in July, evidenced by a 0.1% decline in new orders for nondefense capital goods excluding aircraft.
• Commodities:
  • WTI crude: +3.4% to $77.42/bbl
  • Gold: +0.3% to $2554.90/ozt
  • Copper: +0.2% to $4.22/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1164
  • GBP/USD: -0.2% to 1.3191
  • USD/CNH: +0.1% to 7.1232
  • USD/JPY: +0.1% to 144.53
• The Day Ahead:
  • 9:00 ET: June FHFA Housing Price Index (prior 0.0%) and June S&P Case-Shiller Home Price Index (Briefing.com consensus 6.0%; prior 6.8%)
  • 10:00 ET: August Consumer Confidence (Briefing.com consensus 100.0; prior 100.3)
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results