Bond Market Update

Treasuries Backpedal as Sentiment Improves

• U.S. Treasuries retreated on Tuesday, deepening their pullback from Monday's jump to fresh 2024 highs in most tenors. Treasuries recorded roughly half of their losses at the open after a night that saw a rebound in Japan's Nikkei (+10.2%) and some renewed pressure on the yen. This led to some improvement in sentiment, opening the door for a bounce in U.S. equities and some backtracking in Treasuries after their recent surge. Treasuries trimmed their losses during the opening hour, but renewed pressure drove the Treasury market to fresh lows while equities climbed throughout the day. The backtracking in Treasuries continued through today's $58 bln 3-yr note auction, even though it met solid demand. The market reached lows just before 14:00 ET, followed by a slight dip into the close. Crude oil resisted some intraday pressure while the U.S. Dollar Index rose 0.2% to 102.93.
• Yield Check:
  • 2-yr: +10 bps to 3.98%
  • 3-yr: +10 bps to 3.81%
  • 5-yr: +10 bps to 3.73%
  • 10-yr: +10 bps to 3.89%
  • 30-yr: +11 bps to 4.18%

• News:
  • The Atlanta Fed's GDPNow forecast for Q3 GDP was increased to 2.9% from 2.5% in the previous estimate.
  • Vice President Harris chose Minnesota Governor Walz as her running mate for the November election.
  • The Reserve Bank of Australia left its cash rate at 4.35%, as expected. The central bank expects to keep the cash rate steady into the middle of next year.
  • The Bank of England released its resolvability assessment of major banks, noting that if one of the eight major British banks were to fail, the failure would be absorbed by the system.
  • Japan's June Household Spending was up 0.1% m/m (expected 0.2%; last -0.3%) but down 1.4% yr/yr (expected -0.9%; last -1.8%). June overall wage income was up 4.5% yr/yr (expected 2.3%; last 2.0%).
  • Australia's July ANZ Job Advertisements fell 3.0% m/m (last -2.7%). June Building Approvals fell 6.5% m/m, as expected (last 5.5%), and June Private House Approvals were down 0.5% m/m, as expected (last 1.9%).
  • Eurozone's June Retail Sales were down 0.3% m/m (expected 0.0%; last 0.1%), falling 0.3% yr/yr (expected 0.1%; last 0.5%).
  • Germany's June Factory Orders rose 3.9% m/m (expected 0.4%; last -1.7%).
  • France's Q2 nonfarm payrolls were unchanged qtr/qtr (expected 0.2%; last 0.3%).
  • Swiss July Unemployment Rate rose to 2.5% from 2.4%, as expected. June Retail Sales were down 2.2% yr/yr (expected 0.5%; last -0.2%).
• Today's Data:
  • The trade deficit narrowed to $73.1 billion in June (Briefing.com consensus $72.8 billion) from an upwardly revised $75.0 billion (from -$75.1 billion) in May with exports exceeding imports by $1.9 billion. 
    • The key takeaway from the report, though, is that both exports and imports increased in June, which is a constructive trade dynamic for the global economy. 
  • $58 bln 3-year Treasury note auction results (prior 12-auction average):
    • High yield: 3.810% (4.478%).
    • Bid-to-cover: 2.55 (2.62).
    • Indirect bid: 64.4% (63.3%).
    • Direct bid: 20.3% (19.1%).
• Commodities:
  • WTI crude: +0.1% to $73.14/bbl
  • Gold: -0.3% to $2432.80/ozt
  • Copper: +1.3% to $4.04/lb
• Currencies:
  • EUR/USD: -0.2% to 1.0925
  • GBP/USD: -0.6% to 1.2690
  • USD/CNH: +0.4% to 7.1617
  • USD/JPY: +0.6% to 144.96
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -3.9%)
  • 10:30 ET: Weekly crude oil inventories (prior -3.44 mln)
  • 15:00 ET: June Consumer Credit (Briefing.com consensus $10.0 bln; prior $11.3 bln)
• Treasury Auctions:
  • 13:00 ET: $42 bln 10-yr Treasury note auction results