Bond Market Update

In and Out of Demand

• U.S. Treasuries were in demand in the futures trade overnight following a well-received Japanese 10-yr government bond sale and the weakest reading for China's Caixin Manufacturing PMI (48.3) since 2022, but they lost their allure in the cash session, giving back most of what was gained overnight. The backtracking occurred with the eurozone posting a 1.9% yr/yr reading for May CPI that should solidify an ECB rate cut at Thursday's policy meeting and an April JOLTS - Job Openings Report that showed more job openings than the prior month, which is a positive sign for the labor market. It also occurred as stocks were pressing to their highest levels since March, inviting the notion that some asset reallocation activity might have been taking place in conjunction with a stronger dollar. The U.S. Dollar Index was up 0.5% to 99.23, with the euro and yen both losing ground to the greenback.
• Yield Check:
  • 2-yr: +2 bps to 3.96%
  • 3-yr: +1 bp to 3.92%
  • 5-yr: unch at 4.02%
  • 10-yr: unch at 4.46%
  • 30-yr: -2 bps to 4.98%

• News:
  • China's lead trade negotiator to take firmer stance than predecessor in President Trump's first term, according to The Wall Street Journal
  • Elon Musk calls the "one big, beautiful bill" a "disgusting abomination"
  • Commerce Secretary Lutnick says U.S.-India trade deal is close, according to Reuters
  • Global bond yields ease as Japan sees successful 10-yr government bond sale, according to Bloomberg
  • Senate GOP to look more closely at potential impact of Section 899 provision of House reconciliation bill, according to Bloomberg
  • Bank of Japan Governor Ueda said central bank would raise rates if growth re-accelerates, signals sticking with taper of bond purchases, according to Reuters
  • Iran likely to reject U.S. nuclear deal proposal, according to Reuters
  • OECD lowers global GDP growth forecast to 2.9% (from 3.1%) and U.S. growth forecast to 1.6% (from 2.2%)
  • Americans scaling back summer travel plans, according to Reuters
  • Eurozone's flash May CPI 0.0% m/m (last 0.6%); 1.9% yr/yr (expected 2.0%; last 2.2%). Flash May Core CPI 0.0% m/m (last 1.0%); 2.3% yr/yr (expected 2.4%; last 2.7%)
  • China's May Caixin Manufacturing PMI 48.3 (expected 50.7; last 50.4)
• Today's Data:
  • Factory orders declined 3.7% month-over-month in April (Briefing.com consensus -3.1%) following a downwardly revised 3.4% increase (from 4.3%) in March. Excluding transportation, factory orders declined 0.5% for the second straight month. Shipments of manufactured goods dropped 0.3% on the heels of a 0.2% decline in March.
    • The key takeaway from the report is that April activity was devoid of strength, with declines in durable goods orders, nondurable goods orders, and business spending.
  • The April JOLTS - Job Openings Report showed there were 7.391 mln job openings versus an upwardly revised 7.200 mln (from 7.192 mln) in March.
• Commodities:
  • WTI crude: +1.3% to $63.41/bbl
  • Gold: -0.6% to $3377.60/ozt
  • Copper: -0.6% to $4.83/lb
• Currencies:
  • EUR/USD: -0.6% to 1.1375
  • GBP/USD: -0.1% to 1.3525
  • USD/CNH: -0.2% to 7.1914
  • USD/JPY: +0.8% to 143.93
• The Day Ahead:
  • 07:00 ET: MBA Mortgage Applications Index (prior -1.2%)
  • 08:15 ET: May ADP EMployment Change (Briefing.com consensus 115K; prior 62K)
  • 09:45 ET: May S&P Global US Services PMI (prior 50.8)
  • 10:00 ET: May ISM Services (Briefing.com consensus 52.0%; prior 51.6%)
  • 10:15 ET: Atlanta Fed President Bostic (non-FOMC voter) and Fed Governor Cook (FOMC voter) at Fed Listens event
  • 10:30 ET: EIA Crude Oil Inventories (prior -2.80M)
  • 14:00 ET: Fed's Beige Book