Bond Market Update

Short End Ahead

• U.S. Treasuries are on track for a mixed start with the short end expected to show some relative strength in the early going while the long bond is on course for a modestly lower open. Overnight trade unfolded in generally subdued fashion with Treasury futures inching higher through the Asian session, followed by some light backtracking after focus turned to action in Europe, where volume is on the lighter side due to the observance of Pentecost. The market received another set of deflationary readings in China's CPI and PPI for May while its trade surplus was larger-than-expected with imports showing a bigger drop than the market had expected. The U.S. session will see the release of just one economic report, April Wholesale Inventories (Briefing.com consensus 0.0%; prior 0.4%), at 10:00 ET. Crude oil is on the rise while the U.S. Dollar Index is down 0.2% at 99.03.
• Yield Check:
  • 2-yr: -2 bps to 4.02%
  • 3-yr: -3 bps to 4.00%
  • 5-yr: -2 bps to 4.11%
  • 10-yr: -1 bp to 4.50%
  • 30-yr: +1 bp to 4.97%

• News:
  • NEC Director Hassett said that he does not expect a long meeting between officials from the U.S. and China today, but expects a handshake agreement on rare earth elements.
  • China's overall exports were up 4.8% yr/yr May, but its exports to the U.S. were down 34.4%, according to Bloomberg.
  • Japan still isn't satisfied with the U.S.'s position in trade negotiations, but progress is being made, according to lead negotiator Ryosei Akazawa.
  • There was growing speculation that the European Central Bank has reached the end of its rate cut cycle.
  • China's May CPI was down 0.2% m/m (last 0.1%) and down 0.1% yr/yr (expected -0.2%; last -0.1%); May PPI was down 3.3% yr/yr (expected -3.1%; last -2.7%). May Trade Surplus reached CNY743.56B (expected CNY710.0B; last CNY689.99B) or $103.022B (expected $101.1B; last $96.18B) as exports rose 4.8% yr/yr (expected 5.0%; last 8.1%) and imports fell 3.4% yr/yr (expected -0.9%; last -0.2%).
  • Japan's Q1 GDP was unchanged qtr/qtr (expected -0.2%; last 0.6%); GDP Price Index rose 3.3% (expected 3.2%; last 2.9%); May Bank Lending was up 2.4% yr/yr (expected 2.3%; last 2.3%); May Economy Watchers Current Index rose to 44.4 from 42.6 (expected 43.8).
• Commodities:
  • WTI Crude: +0.5% to $64.90/bbl
  • Gold: -0.3% to $3335.70/ozt
  • Copper: +0.5% to $4.874/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1415
  • GBP/USD: +0.3% to 1.3558
  • USD/CNH: -0.1% to 7.1825
  • USD/JPY: -0.2% to 144.48
• Data out Today:
  • 10:00 ET: April Wholesale Inventories (Briefing.com consensus 0.0%; prior 0.4%)