Bond Market Update

Long End Leads Monday Rally

• U.S. Treasuries started the week on an upbeat note with relative strength in longer tenors sending yields on 10s and 30s to their lowest levels in more than a week after last week's underperformance. Treasuries recorded the bulk of their gains at the open after an overnight rally in the futures market. There was some ongoing focus on tariffs after President Trump spoke in favor of a 15-20% tariff on imports from Europe while EU officials had hoped for a 10% baseline tariff. Separately, Treasury Secretary Bessent's visit to Japan did not produce any noteworthy results. Treasuries withstood an early attempt at a pullback, as they rose past their opening highs in mid-morning trade, maintaining a narrow sideways range into the close. The advance sent the 10-yr yield back below its 50-day moving average (4.412%) to its 200-day moving average (4.361%) while the 30-yr yield settled just above the 50-day moving average (4.920%) of its own. Crude oil remained near $66/bbl while the U.S. Dollar Index fell 0.6% to 97.85.
• Yield Check:
  • 2-yr: -3 bps to 3.85%
  • 3-yr: -4 bps to 3.80%
  • 5-yr: -5 bps to 3.91%
  • 10-yr: -6 bps to 4.37%
  • 30-yr: -6 bps to 4.94%

• News:
  • Treasury Secretary Bessent advised President Trump to not fire Fed Chairman Powell since the Fed is expected to cut rates later this year, according to The Wall Street Journal.
  • The People's Bank of China made no changes to its one-year (3.0%) and five-year (3.5%) loan prime rates.
  • Japan's ruling LDP lost its parliamentary majority in a weekend election, but Prime Minister Ishiba said that he intends to maintain his post.
  • Australia's ambassador to the U.S. said that the joint submarine project with the U.S. and the U.K. is under review.
  • Discount air carrier Ryanair reported a record profit for Q1 while automaker Stellantis reported weak results for the first half of the year.
  • The EU is reportedly looking into banning car rental companies and large corporations from buying non-electric vehicles for their fleets starting in 2030.
  • Hong Kong's July CPI was unchanged m/m (last -0.3%), rising 1.4% yr/yr (expected 1.5%; last 1.9%).
  • New Zealand's Q2 CPI was up 0.5% qtr/qtr (expected 0.6%; last 0.9%), rising 2.7% yr/yr (expected 2.8%; last 2.5%).
  • U.K.'s July Rightmove House Price Index was down 1.2% m/m (last -0.3%) but up 0.1% yr/yr (last 0.8%).
• Today's Data:
  • The Leading Economic Index was down 0.3% in June (Briefing.com consensus -0.1%) while the May reading was revised up to 0.0% from -0.1%.
• Commodities:
  • WTI crude: -0.1% to $65.97/bbl
  • Gold: +1.4% to $3406.40/ozt
  • Copper: +0.5% to $5.64/lb
• Currencies:
  • EUR/USD: +0.6% to 1.1695
  • GBP/USD: +0.6% to 1.3491
  • USD/CNH: -0.1% to 7.1702
  • USD/JPY: -1.0% to 147.28
• No Data on Tomorrow's Schedule