Bond Market Update

Treasuries Pressured as Equity Rebound Continues

• U.S. Treasuries are on track for a lower start with longer tenors expected to show early weakness after an overnight slide in the futures market. Treasury futures spent the night in a steady retreat that included a modest bounce at the end of the Asian session, followed by a slip to fresh lows in recent action. Investor sentiment was improved by an extension of the rebound in Japan's Nikkei (+1.2%) and some pressure on the yen after Bank of Japan Deputy Governor Uchida said that the BoJ will not raise rates during market instability. Economic data released overnight included a smaller-than-expected July trade surpluses from China ($84.65 bln; expected $97.50 bln) and Germany (EUR20.4 bln; expected EUR21.7 bln) while shipper Maersk said that it does not expect a recession in the United States. Crude oil is bouncing from its recent swoon while the U.S. Dollar Index is up 0.2% at 103.21.
• Yield Check:
  • 2-yr: +2 bps to 4.00%
  • 3-yr: +1 bp to 3.82%
  • 5-yr: +3 bps to 3.76%
  • 10-yr: +4 bps to 3.93%
  • 30-yr: +5 bps to 4.23%

• News:
  • Commerzbank reported in-line results and announced a buyback.
  • Tiremaker Continental missed Q2 expectations and lowered its outlook for the year.
  • China's July trade surplus reached $84.65 bln (expected $97.50 bln; last $99.05 bln) as imports rose 7.2% yr/yr (expected 3.5%; last -2.3%) and exports grew 7.0% (expected 9.7%; last 8.6%).
  • Japan's June Leading Index fell to 108.6 from 111.2 (expected 109.0) and Coincident Indicator was down 3.4% m/m (last 1.9%).
  • Australia's July AIG Manufacturing Index hit -19.5 (last -26.5) and AIG Construction Index hit -20.7 (last -23.2).
  • New Zealand's Q2 Employment increased by 0.4% qtr/qtr (expected -0.2%; last -0.2%). Q2 Labor Cost Index was up 0.9% qtr/qtr (expected 0.8%; last 0.8%). Q2 Unemployment Rate rose to 4.6% from 4.4% (expected 4.7%) and Participation Rate rose to 71.7% from 71.6% (expected 71.3%).
  • Germany's June Industrial Production was up 1.4% m/m (expected 1.0%; last -3.1%). June trade surplus reached EUR20.4 bln (expected surplus of EUR21.7 bln; last surplus of EUR25.3 bln) as imports rose 0.3% m/m (expected 2.8%; last -5.5%) and exports fell 3.4% m/m (expected -1.5%; last -3.1%).
  • U.K.'s July Halifax House Price Index was up 0.8% m/m (expected 0.2%; last 0.0%), rising 2.3% yr/yr (last 1.9%).
  • France's June trade deficit reached EUR6.1 bln (expected deficit of EUR7.5 bln; last deficit of EUR7.7 bln) and June Current Account deficit reached EUR2.6 bln (last deficit of EUR2.5 bln).
• Commodities:
  • WTI Crude: +2.1% to $74.76/bbl
  • Gold: +0.3% to $2105.60/ozt
  • Copper: -1.2% to $3.977/lb
• Currencies:
  • EUR/USD: UNCH at 1.0924
  • GBP/USD: +0.3% to 1.2729
  • USD/CNH: +0.4% to 7.1858
  • USD/JPY: +1.7% to 146.99
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 6.9%; 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