Bond Market Update

Yields Drifting Lower

• U.S. Treasuries continue to see yields drifting lower, with longer-dated maturities again leading the way. Market participants are still leaning in favor of the notion that tariff-related inflation pressures will be contained. The "One Big, Beautiful Bill" continues to work its way through the amendments discussion in the Senate. Elon Musk continues to lash out against the bill, saying he will work to prevent any GOP member who campaigned on cutting government spending and then votes for the bill from winning their primary. There is also some chatter this morning that the administration will work to make narrower trade deals for now to avoid imposing new tariffs on July 9. Separately, Fed Chair Powell will be speaking at an ECB Forum at 9:30 a.m. ET, preceding the release of the May JOLTS - Job Openings, May Construction Spending, and June ISM Manufacturing reports at 10:00 a.m. ET. Stocks are indicated to open modestly lower, and the dollar continues to lose ground. The U.S. Dollar Index is down 0.4% to 96.47.
• Yield Check:
  • 2-yr: -1 bp to 3.71%
  • 3-yr: -1 bp to 3.67%
  • 5-yr: -2 bps to 3.77%
  • 10-yr: -3 bps to 4.20%
  • 30-yr: -3 bps to 4.75%

• News:
  • Republicans are considering lowering the amount of the debt ceiling increase in the reconciliation bill in order to win the support of Senator Rand Paul after the Senate parliamentarian did not approve Senator Lisa Murkowski's Medicaid amendment, according to The Hill
  • The Trump administration is considering making narrower trade deals to avoid imposing new tariffs on July 9, according to FT
  • The Senate rejected an amendment to the reconciliation bill to increase funding to rural hospitals, according to Politico
  • Elon Musk says he will work to keep any GOP member who campaigned on cutting government spending and then votes for "One Big, Beautiful Bill" from winning their primary; calls for new political party
  • ECB policymaker Simkus said that the central bank is unlikely to make any changes to rates until later in the year, while policymaker de Guindos said that the current euro exchange rate is perfectly acceptable
  • Eurozone's flash June CPI 0.3% m/m (last 0.0%); 2.0% yr/yr, as expected (last 1.9%)
  • China's June Caixin Manufacturing PMI 50.4 (expected 49.2; last 48.3)
• Commodities:
  • WTI crude: +0.8% to $65.65/bbl
  • Gold: +1.7% to $3362.50/ozt
  • Copper: +1.3% to $5.15/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1808
  • GBP/USD: +0.3% to 1.3769
  • USD/CNH: unch at 7.1575
  • USD/JPY: -0.8% to 142.85
• The Day Ahead:
  • 09:45 ET: June S&P Global U.S. Manufacturing PMI - Final (prior 52.0)
  • 10:00 ET: May Construction Spending (Briefing.com consensus -0.2%; prior -0.4%)
  • 10:00 ET: June ISM Manufacturing Index (Briefing.com consensus 48.8%; prior 48.5%)
  • 10:00 ET: May JOLTS - Job Openings (prior 7.391M)