Bond Market Update

Soft Start

• U.S. Treasuries saw some selling in the futures trade as it grappled with concerns about inflation tied to President Trump's announcement that the U.S. will be doubling steel and aluminum tariffs to 50%, effective Wednesday; China turning the tables on the U.S. and blaming it for violating the preliminary trade agreement reached in Geneva; and OPEC+ agreeing to a 411K bpd increase in production in July that was considered to be better than feared. WTI crude futures are up 4.1% to $63.28/bbl. With the softness in Treasuries, there has also been some softness in the dollar. The U.S. Dollar Index is down 0.5% to 98.87.
• Yield Check:
  • 2-yr: unch at 3.92%
  • 3-yr: unch at 3.88%
  • 5-yr: unch at 3.98%
  • 10-yr: +1 bp to 4.43%
  • 30-yr: +3 bps to 4.97%

• News:
  • China turns blame back on U.S. for violating preliminary trade agreement reached in Geneva, according to The Wall Street Journal
  • President Trump announces doubling of steel, aluminum tariffs to 50%, effective Wednesday, according to Reuters
  • China tells US not to 'play with fire' on Taiwan after Hegseth comments, according to Politico
  • OPEC+ agrees to raise production in July by 411,000 barrels per day, according to Bloomberg
  • Proposal for nuclear deal sent to Iran by U.S., according to New York Times
  • Fed Governor Waller (FOMC voter) says rate cuts still possible in 2025, as he doesn't think price adjustments related to tariffs will be persistent, according to Reuters
  • Fed's Daly (non-FOMC voter) thinks two rate cuts in 2025 still likely, according to Bloomberg
  • The European Central Bank is expected to announce a rate cut at the conclusion of its meeting on Thursday
  • Eurozone's May Manufacturing PMI 49.4 (expected 48.4; last 49.0)
  • China's May Manufacturing PMI 49.5, as expected (last 49.0) and Non-Manufacturing PMI 50.3 (expected 50.6; last 50.4)
• Commodities:
  • WTI crude: +4.1% to $63.28/bbl
  • Gold: +1.7% to $3371.20/ozt
  • Copper: +4.1% to $4.87/lb
• Currencies:
  • EUR/USD: +0.6% to 1.1411
  • GBP/USD: +0.6% to 1.3534
  • USD/CNH: +0.1% to 7.2117
  • USD/JPY: -0.9% to 142.74
• The Week Ahead:
  • 09:45 ET: May S&P Global US Manufacturing PMI - FInal (prior 50.2)
  • 10:00 ET: May ISM Manufacturing Index (Briefing.com consensus 49.0%; prior 48.7%)
  • 10:00 ET: April Construction Spending (Briefing.com consensus 0.1%; prior -0.5%)