Bond Market Update

Long End Ahead

• U.S. Treasuries are on track for a higher start, looking to recover some of their post-FOMC losses. Treasury futures began inching higher last evening, continuing their advance into the night. The market reached highs around the start of the European session, followed by some light backtracking over the past few hours. The night brought a full slate of economic data, including China's official Manufacturing PMI (49.3; prior 49.7), which showed a deepening contraction while Non-Manufacturing PMI (50.1; prior 50.5) showed a deceleration in growth. U.S. officials reached a trade deal with South Korea, which calls for South Korea to invest $350 bln in the U.S. and buy $100 bln worth of energy products from the U.S. Imports from South Korea will face a 15% tariff while U.S. exports to South Korea will not be subject to any tariffs. The U.S. session will feature the 8:30 ET release of the Personal Income/Outlays report for June, which will help shape the market's rate expectations after the July FOMC Statement greatly reduced the likelihood of a rate cut in September. Crude oil is in the red while the U.S. Dollar Index is flat at 99.81.
• Yield Check:
  • 2-yr: -1 bp to 3.93%
  • 3-yr: -2 bps to 3.87%
  • 5-yr: -3 bps to 3.94%
  • 10-yr: -4 bps to 4.34%
  • 30-yr: -4 bps to 4.87%

• News:
  • The Bank of Japan's latest meeting concluded with no changes to policy.
  • Imports from India will be subject to a 25% tariff, starting tomorrow.
  • Bundesbank President Nagel said that "the last mile of disinflation is the hardest" and that policy should not be loosened prematurely.
  • China's July Manufacturing PMI hit 49.3 (expected 49.7; last 49.7) and July Non-Manufacturing PMI hit 50.1 (expected 50.3; last 50.5).
  • Japan's June Industrial Production rose 1.7% m/m (expected -0.7%; last -0.1%). June Retail Sales rose 2.0% yr/yr (expected 1.8%; last 1.9%). July Housing Starts fell 15.6% yr/yr (expected -16.3%; last -34.4%) and July Household Confidence fell to 33.7 from 34.5 (expected 35.1).
  • South Korea's June Industrial Production rose 1.6% m/m (last -3.3%), increasing 1.6% yr/yr (last -0.3%). June Retail Sales were up 0.5% m/m (last -0.1%).
  • Hong Kong's Q2 GDP expanded 0.4% qtr/qtr (expected -0.2%; last 1.9%), growing 3.1% yr/yr (expected 2.8%; last 3.1%). June Retail Sales were up 0.7% yr/yr (last 2.4%).
  • Australia's June Building Approvals were up 11.9% m/m (expected 1.8%; last 2.2%), rising 5.4% yr/yr (expected 8.0%; last 8.1%). June Private Sector Credit was up 0.6% m/m (expected 0.5%; last 0.5%) and June Private House Approvals were down 2.0% m/m (last -1.0%). Q2 Import Price Index was down 0.8% qtr/qtr (expected -0.5%; last 3.3%) and Export Price Index was down 4.5% qtr/qtr (last 2.1%). July Retail Sales rose 1.2% m/m (expected 0.4%; last 0.1%) and Q2 Retail Sales were up 0.3% qtr/qtr (last 0.1%).
  • Singapore's Q2 Business Expectations rose to 5.00 from -6.00.
  • Eurozone's June Unemployment Rate remained at 6.2% (expected 6.3%).
  • Germany's July Import Price Index was unchanged m/m (expected -0.2%; last -0.7%), falling 1.4% yr/yr (expected -1.6%; last -1.1%). July Unemployment increased by 2,000 (expected 15,000; last 10,000) and July Unemployment Rate remained at 6.3% (expected 6.4%).
  • France's July CPI was up 0.2% m/m (expected 0.3%; last 0.4%), rising 1.0% yr/yr, as expected (last 1.0%). June PPI was down 0.2% m/m (last -0.9%) but up 0.2% yr/yr (last 0.0%).
  • Italy's June Unemployment Rate fell to 6.3% from 6.5% (expected 6.4%). July CPI was up 0.4% m/m (expected 0.1%; last 0.2%), rising 1.7% yr/yr (expected 1.5%; last 1.7%). June PPI was up 1.5% m/m (last -0.7%), rising 2.5% yr/yr (last 1.7%).
  • Spain's May Current Account surplus reached EUR6.44 bln (last surplus of EUR1.36 bln).
  • Swiss June Retail Sales were up 3.8% yr/yr (expected 0.2%; last 0.3%).
• Commodities:
  • WTI Crude: -0.5% to $69.62/bbl
  • Gold: +0.2% to $3358.00/ozt
  • Copper: -21.8% to $4.370/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1445 
  • GBP/USD: UNCH at 1.3237
  • USD/CNH: -0.1% to 7.2043
  • USD/JPY: +0.3% to 149.87
• Data out Today:
  • 8:30 ET: June Personal Income (Briefing.com consensus 0.3%; prior -0.4%), Personal Spending (Briefing.com consensus 0.4%; prior -0.1%), PCE Prices (Briefing.com consensus 0.3%; prior 0.1%), core PCE Prices (Briefing.com consensus 0.3%; prior 0.2%), Q2 Employment Cost Index (Briefing.com consensus 0.8%; prior 0.9%), weekly Initial Claims (Briefing.com consensus 220,000; prior 217,000), and Continuing Claims (prior 1.955 mln)
  • 9:45 ET: July Chicago PMI (Briefing.com consensus 42.1; prior 40.4)
  • 10:30 ET: Weekly natural gas inventories (prior +23 bcf)