Bond Market Update

Treasuries Dip as May CPI Looms

• U.S. Treasuries are on track for a lower start with the belly set to show relative weakness in the early going, though some volatility is likely to follow the 8:30 ET release of May CPI (Briefing.com consensus 0.2%) and Core CPI (Briefing.com consensus 0.3%). Treasury futures edged higher in early evening trade, but selling pressure began building during the latter part of the Asian session, continuing into early morning trade. The London meeting between officials from the U.S. and China resulted in an agreement on a framework for implementing what was agreed upon during the mid-May meeting in Geneva. The agreement was somewhat disappointing since U.S. officials spent two days promising a positive outcome from the London meeting. In other trade related news, a deal between the U.S. and the European Union could be made after the July 9 deadline, according to Bloomberg. The U.S. Treasury will follow yesterday's soft sale of 3-yr notes with a $39 bln 10-yr note reopening. Crude oil is reclaiming its loss from yesterday while the U.S. Dollar Index is little changed at 99.09.
• Yield Check:
  • 2-yr: +3 bps to 4.04%
  • 3-yr: +1 bp to 4.00%
  • 5-yr: +3 bps to 4.11%
  • 10-yr: +3 bps to 4.50%
  • 30-yr: +2 bps to 4.96%

• News:
  • The U.S. and India might be on track to announce an interim trade deal by the end of the month, according to Reuters.
  • British Chancellor Reeves is unveiling a three-year spending plan today for the U.K., according to Bloomberg.
  • European Central Bank policymaker Kazaks spoke in favor of more rate cuts.
  • Japan's May PPI was down 0.2% m/m (last 0.3%) and up 3.2% yr/yr (expected 3.5%; last 4.1%).
  • South Korea's May Unemployment Rate remained at 2.7%.
• Commodities:
  • WTI Crude: +1.5% to $65.97/bbl
  • Gold: +0.4% to $3355.70/ozt
  • Copper: -2.1% to $4.80/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1433
  • GBP/USD: UNCH at 1.3491
  • USD/CNH: UNCH at 7.1904
  • USD/JPY: +0.3% to 145.30
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 12.5%; prior -3.9%)
  • 8:30 ET: May CPI (Briefing.com consensus 0.2%; prior 0.2%) and Core CPI (Briefing.com consensus 0.3%; prior 0.2%)
  • 10:30 ET: Weekly crude oil inventories (prior -4.30 mln)
  • 14:00 ET: May Treasury Budget (prior $258.4 bln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results