Bond Market Update

Recent Strength Maintained Amid Equity Volatility

• U.S. Treasuries are on track for a higher start with shorter tenors set to pace the early advance after a night that saw continued pressure on global equity markets with Japan's Nikkei (-13.5%) plunging to levels last seen in November while the yen climbed to 142/dollar, reaching its best level against the dollar since early January. The overnight continuation of the pressure on markets has been attributed to unwinding of the yen carry trade and geopolitical fears surrounding an expected Iranian military retaliation against Israel after Israel killed a high-ranking Iranian military official. Crude oil, however, is falling past its June low to levels last seen in early February. The early volatility has boosted rate cut expectations with the market now having near certainty that the FOMC will announce a 50-bps rate cut in September. The U.S. Dollar Index is down 0.6% at 102.62.
• Yield Check:
  • 2-yr: -14 bps to 3.73%
  • 3-yr: -13 bps to 3.57%
  • 5-yr: -11 bps to 3.51%
  • 10-yr: -8 bps to 3.71%
  • 30-yr: -6 bps to 4.05%

• News:
  • China's July Caixin Services PMI hit 52.1 (expected 51.4; last 51.2).
  • Japan's July Services PMI hit 53.7 (expected 53.9; last 49.4).
  • India's July Services PMI hit 60.3 (expected 61.6; last 60.5).
  • Singapore's June Retail Sales were down 3.7% m/m (last 2.4%), falling 0.6% yr/yr (last 2.2%).
  • Hong Kong's July Manufacturing PMI hit 49.5 (last 48.2).
  • Australia's July Services PMI hit 50.4 (expected 50.8; last 51.2). July MI Inflation Gauge was up 0.4% m/m (last 0.3%).
  • Eurozone's June PPI was up 0.5% m/m (expected 0.1%; last -0.2%) but down 3.2% yr/yr (expected -3.3%; last -4.1%). July Services PMI hit 51.9, as expected (last 52.8). August Sentix Investor Confidence fell to -13.9 from -7.3 (expected -5.5).
  • Germany's July Services PMI hit 52.5 (expected 52.0; last 53.1).
  • U.K.'s July Services PMI hit 52.5 (expected 52.4; last 52.1).
  • France's July Services PMI hit 50.1 (expected 50.7; last 49.6).
  • Italy's July Services PMI hit 51.7 (expected 53.0; last 53.7).
  • Spain's July Services PMI hit 53.9 (expected 56.2; last 56.8).
• Commodities:
  • WTI Crude: -2.1% to $71.93/bbl
  • Gold: -1.8% to $2424.00/ozt
  • Copper: -4.0% to $3.939/lb
• Currencies:
  • EUR/USD: +0.5% to 1.0960
  • GBP/USD: -0.3% to 1.2760
  • USD/CNH: -1.0% to 7.0863
  • USD/JPY: -2.8% to 142.37
• Data out Today:
  • 9:45 ET: Final July S&P Global U.S. Services PMI (prior 56.0)
  • 10:00 ET: July ISM Non-Manufacturing Index (Briefing.com consensus 51.3%; prior 48.8%)
  • 14:00 ET: Senior Loan Officer Survey