Bond Market Update

Belly Leads

• U.S. Treasuries are on track for a higher start with the belly expected to show some relative strength. Treasury futures faced some selling during the latter portion of the Asian session, but they bounced to fresh highs once the focus shifted to action in Europe. The rally had limited staying power, as futures returned toward last evening's levels over the past three hours. Overnight action saw some weakness in Asian equities, followed by a mostly positive showing in Europe. Chip giant NVIDIA (NVDA) reported strong results last evening, but not strong enough to live up to sky-high expectations. The overnight data flow was on the light side, but things will pick up during the U.S. session. The second estimate of Q2 GDP (prior 2.8%) will be released at 8:30 ET and the U.S. Treasury will conclude this week's note auction slate with a $44 bln 7-yr note sale at 13:00 ET. Crude oil is looking to snap a two-day skid while the U.S. Dollar Index is up 0.1% at 101.19.
• Yield Check:
  • 2-yr: -1 bp to 3.86%
  • 3-yr: -1 bp to 3.72%
  • 5-yr: -4 bps to 3.63%
  • 10-yr: -1 bp to 3.83%
  • 30-yr: -1 bp to 4.12%

• News:
  • Atlanta Fed President (FOMC voter) Bostic said that it may be time to cut rates, but he wants to see more data, according to Bloomberg.
  • Chinese banks struggled after Bank of Communications reported poor results.
  • Sweden's Riksbank is on track to cut rates two or three more times this year, according to Deputy Governor Bunge.
  • The Italian government is expected to signal commitment to reducing its deficit-to-GDP ratio below the EU's 3.0% target in 2026.
  • Japan's August Household Confidence remained at 36.7 (expected 36.9).
  • Australia's Q2 Building Capital Expenditure decreased 3.8% qtr/qtr (last -0.9%), Q2 Plant/Machinery Capital Expenditure fell 0.5% qtr/qtr (last 3.7%), and Q2 Private New Capital Expenditure was down 2.2% qtr/qtr (expected 0.9%; last 1.9%).
  • New Zealand's August ANZ Business Confidence jumped to 50.6 from 27.1.
  • Eurozone's August Business and Consumer Survey rose to 96.6 from 96.0 (expected 95.8).
  • Germany's flash August CPI was down 0.1% m/m (expected 0.0%; prior 0.3%) and up 1.9% yr/yr (expected 2.1%; last 2.3%).
  • Spain's August CPI was unchanged m/m (expected 0.1%; last -0.5%), rising 2.2% yr/yr (expected 2.4%; last 2.8%). August Core CPI was up 2.7% yr/yr (last 2.8%). July Business Confidence ticked up to -3.6 from -4.2.
• Commodities:
  • WTI Crude: +0.5% to $74.91/bbl
  • old: +0.7% to $2554.70/ozt
  • Copper: -0.5% to $4.129/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1092
  • GBP/USD: -0.1% to 1.3181
  • USD/CNH: -0.5% to 7.0918
  • USD/JPY: +0.1% to 144.58
• Data out Today:
  • 8:30 ET: Q2 GDP -- second estimate (prior 2.8%), Q2 GDP Deflator -- second estimate (prior 2.3%), weekly Initial Claims (prior 232,000), Continuing Claims (prior 1.863 mln), advance July goods trade balance (prior -$96.6 bln), advance Retail Inventories (prior 0.7%), and advance Wholesale Inventories (prior 0.2%)
  • 10:00 ET: July Pending Home Sales (Briefing.com consensus 1.2%; prior 4.8%)
  • 10:30 ET: Weekly natural gas inventories (prior +35 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results