Bond Market Update

Pullback Deepens

• U.S. Treasuries are on track for a lower start after an overnight retreat in the futures market. Treasury futures spent the night in a slow slide that was interrupted by a short-lived rebound around the start of the European session. However, recent trade has seen a return to overnight lows. The market received a fresh batch of flash Manufacturing and Services PMI readings for July with Japan's Manufacturing PMI (48.8) returning to contractionary territory while Germany's Services PMI (50.1) emerged from contraction by a slim margin. The European Central Bank will release its latest policy statement at 8:15 ET, but a rate cut is not expected at this time. Crude oil is returning to its 50-day moving average (65.83) while the U.S. Dollar Index is up 0.2% at 97.39.
• Yield Check:
  • 2-yr: +2 bps to 3.90%
  • 3-yr: +2 bps to 3.85%
  • 5-yr: +3 bps to 3.96%
  • 10-yr: +2 bps to 4.41%
  • 30-yr: +1 bp to 4.96%

• News:
  • South Korea is reportedly looking to invest $100 bln in the U.S. as part of a trade deal with the Trump administration.
  • Expectations for an October rate hike from the Bank of Japan rose significantly after yesterday's announcement of Japan's trade deal with the U.S.
  • Deutsche Bank and BNP Paribas reported stronger-than-expected results for Q2.
  • Japan's flash July Manufacturing PMI hit 48.8 (expected 50.2; last 50.1) and flash July Services PMI hit 53.5 (last 51.7).
  • South Korea's Q2 GDP expanded 0.6% qtr/qtr (expected 0.5%; last -0.2%), growing 0.5% yr/yr (expected 0.4%; last 0.0%).
  • India's flash July Manufacturing PMI hit 59.2 (last 58.4) and flash July Services PMI hit 59.8 (last 60.4).
  • Australia's flash July Manufacturing PMI hit 51.6 (last 50.6) and flash July Services PMI hit 53.5 (last 51.7).
  • Eurozone's flash July Manufacturing PMI hit 49.8 (expected 49.7; last 49.5) and flash July Services PMI hit 51.2 (expected 50.6; last 50.5).
  • Germany's August GfK Consumer Climate fell to -21.5 from -20.3 (expected -19.4). Flash July Manufacturing PMI hit 49.2 (expected 49.4; last 49.0) and flash July Services PMI hit 50.1 (expected 50.0; last 49.7).
  • U.K.'s flash July Manufacturing PMI hit 48.2 (expected 47.9; last 47.7) and flash July Services PMI hit 51.2 (expected 52.8; last 52.8). July CBI Industrial Trends Orders rose to -30 from -33 (expected -27).
  • France's July Business Survey fell to 96 from 97, as expected. Flash July Manufacturing PMI hit 48.4 (expected 48.5; last 48.1) and flash July Services PMI hit 49.7, as expected (last 49.6).
  • Spain's June PPI was up 0.8% yr/yr (last 0.0%). Q2 Unemployment Rate fell to 10.3% from 11.4% (expected 10.6%).
• Commodities:
  • WTI Crude: +0.6% to $65.70/bbl
  • Gold: -0.9% to $3366.90/ozt
  • Copper: +1.3% to $5.89/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1756
  • GBP/USD: -0.2% to 1.3548
  • USD/CNH: UNCH at 7.1522
  • USD/JPY: +0.1% to 146.49
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 225,000; prior 221,000) and Continuing Claims (prior 1.956 mln)
  • 9:45 ET: Flash July S&P Global U.S. Manufacturing PMI (prior 52.9) and flash July S&P Global U.S. Services PMI (prior 52.9)
  • 10:00 ET: June New Home Sales (Briefing.com consensus 650,000; prior 623,000)
  • 10:30 ET: Weekly natural gas inventories (prior +46 bcf)