Bond Market Update

Support Factors

• U.S. Treasuries are bid across the curve, with the long end leading gains into the start of the cash session. The overnight buying interest transpired amid reports that the "One Big, Beautiful Bill" passed a procedural vote in the Senate and is on course for a full vote tonight in the Senate. If passed, it will head to the House for review, setting up the possibility of the bill being on the president's desk for signing by July 4. The CBO estimates the Senate version will add $3.3 trillion to the deficit over the next decade. Strikingly, the Treasury market has not been unnerved by that view. Parallel reports that the U.S. could be closing in on other trade deals, that Canada has removed its digital services tax in an aim to renew negotiations with the U.S., and that China's official Manufacturing PMI registered its third straight monthly contraction in June have acted as supports for the market. The U.S. Dollar Index is down 0.2% to 97.20.
• Yield Check:
  • 2-yr: -1 bp to 3.73%
  • 3-yr: -2 bps to 3.70%
  • 5-yr: -2 bps to 3.81%
  • 10-yr: -3 bps to 4.26%
  • 30-yr: -4 bps to 4.81%

• News:
  • Senate voted 51-49 on procedural motion to advance large reconciliation bill to a full Senate vote tonight; House expected to vote Wednesday. The bill includes extension of 2017 tax cuts, spending cuts (Medicaid and green energy spending), deregulation, energy reform, immigration reform, and a debt ceiling increase of $5 trillion
  • President Trump says he "could" extend tariff pause, but he'd rather send letters to countries letting them know what the tariff rates are. He said he will appoint "anybody but Powell" to the Fed. He would consider removing Iran sanctions if they are peaceful, according to FOX Business
  • There is some ongoing hope for an EU-U.S. trade deal to be reached by July 9
  • Canada removes digital services tax in effort to resume trade negotiations with U.S.
  • Atlanta Fed President Bostic (non-FOMC voter) doesn't think tariffs will be one-time price shift
  • China's Manufacturing PMI (49.7) remained in contraction for the third consecutive month
  • Large banks all pass Federal Reserve's stress test
  • President Trump suggested keeping 25% on Japanese autos, according to Bloomberg
  • FT reported that major European ports are experiencing highest congestion since the coronavirus pandemic due to low river levels and the impact of tariffs
  • China's June Manufacturing PMI 49.7 (expected 49.6; last 49.5) and Non-Manufacturing PMI 50.5 (expected 50.3; last 50.3)
• Commodities:
  • WTI crude: -0.4% to $65.23/bbl
  • Gold: flat at $3287.10/ozt
  • Copper: -0.7% to $5.09/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1726
  • GBP/USD: -0.1% to 1.3704
  • USD/CNH: -0.1% to 7.1624
  • USD/JPY: -0.3% to 144.31
• The Day Ahead:
  • 09:45 ET: June Chicago PMI (Briefing.com consensus 43.4; prior 40.5)