Bond Market Update

Long End Ahead

• U.S. Treasuries are on track for a higher start with longer tenors set to show relative strength in the early going after underperforming on Monday. Treasury futures spent the early portion of the night in a sideways range, rallying to highs as the focus shifted to action in Europe, where the UK reported weak employment figures, leading to speculation about another rate cut from the Bank of England. The market is still waiting on some news from U.S.-China trade negotiations in London, which are now continuing for the second day in a row. Once again, the U.S. economic calendar was light, with today's reports limited to the NFIB Small Business Optimism Index for May (98.8; prior 95.8). The U.S. Treasury will kick off this week's auction slate with a $58 bln 3-yr note sale at 13:00 ET. Crude oil is rising to its highest level since early April while the U.S. Dollar Index is up 0.1% at 98.99.
• Yield Check:
  • 2-yr: -1 bp to 3.99%
  • 3-yr: -2 bps to 3.96%
  • 5-yr: -3 bps to 4.06%
  • 10-yr: -3 bps to 4.45%
  • 30-yr: -4 bps to 4.91%

• News:
  • Japan's lead negotiator, Ryosei Akazawa, will be returning to the U.S. on Friday to continue working out a deal but said, according to The Japan Times, that "it feels like we're still in a dense fog."
  • Japan's LDP is reportedly looking to provide cash handouts ahead of the upper house election this summer to deal with cost-of-living increases.
  • Japan's May Machine Tool Orders were up 3.4% yr/yr (last 7.7%).
  • Australia's June Westpac Consumer Sentiment was up 0.5% (last 2.2%); May NAB Business Confidence rose to 2 from -1.
  • South Korea's April Current Account surplus reached $5.7 bln (last $9.1 bln).
  • Eurozone's June Sentix Investor Confidence rose to 0.2 from -8.1 (expected -5.3).
  • UK's April Unemployment Rate rose to 4.6% from 4.5% (expected 4.6%); Claimant Count reached 33.1K (expected 9.5K; last -21.2K); Average Earnings Index + Bonus was up 5.3% yr/yr (expected 5.5%; last 5.6%).
  • Italy's Industrial Production was up 1.0% m/m (expected 0.0%; last 0.0%) and up 0.3% yr/yr (last -1.8%).
  • Switzerland's SECO Consumer Climate rose to -37 from -39 (expected -38).
• Commodities:
  • WTI Crude: +0.5% to $65.63/bbl
  • Gold: UNCH at $3355.20/ozt
  • Copper: -0.8% to $4.885/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1436
  • GBP/USD: -0.3% to 1.3510
  • USD/CNH: +0.1% to 7.1854
  • USD/JPY: UNCH at 144.51
• Data out Today:
  • 6:00 ET: May NFIB Small Business Optimism (actual 98.8; prior 95.8)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results