Bond Market Update

Safety Trade

• U.S. Treasuries have garnered some safe-haven interest following the U.S. bombing of three nuclear enrichment sites in Iran over the weekend; however, the rush to safety has been limited, partly because oil prices have been contained (given the magnitude of the U.S. action) and partly because market participants are not expecting a major regional escalation. The U.S. dollar, similarly, has rallied on a safe-haven trade. The U.S. Dollar Index is up 0.7% to 99.36. Lots to take in this week for the Treasury market. Aside from geopolitical developments, there is $183 billion of new supply coming in 2-yr, 5-yr, and 7-yr note auctions; Fed Chair Powell's semi-annual monetary policy testimony on Tuesday and Wednesday; and a round of economic data that features the May personal income and spending report on Friday.
• Yield Check:
  • 2-yr: -1 bp to 3.90%
  • 3-yr: -1 bp to 3.85%
  • 5-yr: -2 bps to 3.94%
  • 10-yr: -2 bps to 4.36%
  • 30-yr: -1 bp to 4.88%

• News:
  • President Trump ordered U.S. strikes on three Iranian nuclear facilities over the weekend and said Iran “must now make peace, If they do not, future attacks will be far greater.”
  • Iranian Parliament approved a measure to close Strait of Hormuz, but final decision will be made by Iran's Supreme National Security Council, according to The Hill
  • Secretary of State Marco Rubio in interview urged Iran to pursue diplomacy and said U.S. is ready to meet with Iran, according to CBS News
  • President Trump says he prefers money for green energy tax credits gets used for something else in reconciliation bill
  • Senate parliamentarian rejects food aid cuts that were supposed to be part of reconciliation bill, according to New York Times
  • President Trump posts renewed criticism on Fed Chairman Jerome Powell; says "Maybe, just maybe, I’ll have to change my mind about firing him? But regardless, his term ends shortly!"
  • U.S. and EU getting close to deal on several non-tariff trade issues, according to The Wall Street Journal
  • South Korea's exports were up 8.3% through the first 20 days of June with chip exports jumping 21.8% year-over-year
  • Japan's flash June Manufacturing PMI 50.4 (expected 49.5; last 49.4) and flash Services PMI 51.5 (last 51.0)
  • Eurozone's flash June Manufacturing PMI 49.4 (expected 49.6; last 49.4) and flash Services PMI 50.0, as expected (last 49.7)
• Commodities:
  • WTI crude: +0.7% to $74.39/bbl
  • Gold: +0.2% to $3393.00/ozt
  • Copper: -0.5% to $4.81/lb
• Currencies:
  • EUR/USD: -0.4% to 1.1470
  • GBP/USD: -0.5% to 1.3374
  • USD/CNH: +0.2% to 7.1893
  • USD/JPY: +1.1% to 147.72
• The Day Ahead:
  • 09:45 ET:  Flash June S&P Global U.S. Manufacturing PMI (prior 52.0) and flash June S&P Global U.S. Services PMI (prior 53.7)
  • 10:00 ET: May Existing Home Sales (Briefing.com consensus 3.94 mln; prior 4.00 mln)