Bond Market Update

Leaning Weaker

• U.S. Treasuries are a little weaker this morning, as participants wait anxiously for key central bank decisions this week, developments in the Israel-Iran conflict, and news from the G7 meeting in Canada. Equity markets have found a bid, coming off Friday's losses, supported in part by the understanding that the Israel-Iran conflict remains contained and that there hasn't been any major disruption to oil supply lines. The lone piece of U.S. economic data today is the June Empire State Manufacturing Survey at 8:30 a.m. ET; however, China reported a slate of key data over the weekend that featured stronger-than-expected retail sales for May.
• Yield check:
  • 2-yr: +1 bp to 3.97%
  • 3-yr: +1 bp to 3.93%
  • 5-yr: +1 bp to 4.03%
  • 10-yr: +3 bps to 4.45%
  • 30-yr: +2 bps to 4.94%
• News:
  • President Trump, in an interview, says it is "possible" U.S. could get involved in Israel's military operation in Iran, according to ABC News
  • China reported stronger-than-expected Retail Sales growth for May (6.4%; expected 4.9%), but Industrial Production growth (5.8%; expected 5.9%) was shy of estimates
  • The Bank of Japan will announce its latest policy decision overnight, but a rate hike is not expected
  • Senate Majority Leader John Thune in interview believes House & Senate will reach a compromised figure on state and local tax deduction and says Senate will work through July 4th recess to make sure large reconciliation bill can pass, according to Fox News
  • Japan & U.S. will try to reach trade agreement during G-7 this week, according to Bloomberg
  • ECB policymaker de Guindos said that the risk of undershooting the inflation target is very limited, while policymaker Nagel said that the central bank should not signal its next move due to exceptional uncertainty
  • EU ready to accept 10% tariff rate from U.S. under right conditions, according to Reuters, citing German newspaper Handelsblatt
  • Standard & Poor's affirmed Germany's and Sweden's AAA ratings with a Stable outlook
• Commodities:
  • WTI crude: -1.5% to $71.95/bbl
  • Gold: -0.4% to $3438.10/toz
  • Copper: -0.3% to $4.80/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1572
  • GBP/USD: +0.1% to 1.3578
  • USD/CNH: -0.1% to 7.1824
  • USD/JPY: flat at 144.11
• The Day Ahead:
  • 08:30 ET: June Empire State Manufacturing (Briefing.com consensus -6.6; prior -9.2)
  • 13:00 ET: $13 bln 20-yr bond reopening