Bond Market Update

Shoddy Bond Auction Keeps Market Pressured

• U.S. Treasuries finished Thursday with losses across the curve after giving back their modest opening gains in reaction to a larger-than-expected drop in weekly jobless claims (to 233,000 from 250,000; Briefing.com consensus 242,000). The trading day started on a slightly higher note after a night that was light on economic data, leaving the focus on the Nikkei (-0.7%), which ended lower, but avoided a sharper slide. Treasuries reversed from their starting highs in immediate reaction to the jobless claims report, reaching morning lows about an hour later. Treasuries inched up off their lows in mid-morning action with the 2-yr note leading the bounce, but longer tenors slipped to fresh lows after the U.S. Treasury completed this week's sloppy note and bond auction slate with an ugly 30-yr bond auction, which drew the biggest tail in nearly a year. The final hour of action saw another rise off lows, leaving the market near levels seen right after the jobless claims report crossed the wires. Crude oil extended yesterday's bounce while the U.S. Dollar Index ticked up 0.1% to 103.25.
• Yield Check:
  • 2-yr: +4 bps to 4.04%
  • 3-yr: +4 bps to 3.88%
  • 5-yr: +4 bps to 3.83%
  • 10-yr: +3 bps to 4.00%
  • 30-yr: +3 bps to 4.29%

• News: 
  • The Atlanta Fed's GDPNow forecast for Q3 GDP was left unrevised at 2.9% in the latest update.
  • The Reserve Bank of India made no policy changes at today's meeting.
  • Toyota (TM) lowered its 2024 production forecast below 10 mln units for the first time since the pandemic.
  • British recruitment firm PageGroup noted that activity softened near the end of the first half of the year.
  • Conglomerate Siemens lowered the outlook for its industrial unit.
  • Japan's July Bank Lending was up 3.2% yr/yr, as expected (last 3.2%). June Current Account surplus reached JPY1.78 trln (expected surplus of JPY2.34 trln; last surplus of JPY2.41 trln). July Economy Watchers Current Index rose to 47.5 from 47.0 (expected 47.4).
  • New Zealand's Q3 Inflation Expectations decelerated to 2.0% from 2.3%.
• Today's Data:
  • Initial jobless claims for the week ending August 3 decreased by 17,000 to 233,000 (Briefing.com consensus 242,000). Continuing jobless claims for the week ending July 27 increased by 6,000 to 1.875 million.
    • The key takeaway from the report is that the downturn in initial jobless claims -- a leading indicator -- is helping to quell recession concerns.
  • Wholesale Inventories increased by 0.2% in June after increasing a revised 0.5% (from 0.6%) in May.
  • Weekly natural gas inventories increased by 21 bcf after increasing by 18 bcf a week ago.
  • $25 bln 30-year Treasury bond auction results (prior 12-auction average):
    • High yield: 4.314% (4.446%).
    • Bid-to-cover: 2.31 (2.40).
    • Indirect bid: 65.3% (65.6%).
    • Direct bid: 15.5% (18.2%).
• Commodities:
  • WTI crude: +1.3% to $76.19/bbl
  • Gold: +1.3% to $2463.30/ozt
  • Copper: +0.8% to $3.97/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0915
  • GBP/USD: +0.5% to 1.2748
  • USD/CNH: +0.2% to 7.1805
  • USD/JPY: +0.4% to 147.22
• No Data on Tomorrow's Schedule