Bond Market Update

Long End Lags Ahead of Jobs Report

• U.S. Treasuries are on track for a lower start to August, though early action is likely to feature some volatility when the market receives the Employment Situation report for July (Briefing.com consensus 102,000; prior 147,000) at 8:30 ET. Treasury futures spent the bulk of the evening in a sideways range, slipping to lows once the focus shifted to action in Europe. Global equity markets have had a weak showing and there has been some focus on new tariff rates for countries that did not make deals with the U.S. in recent weeks. Economic data released overnight pointed to contracting manufacturing sectors in China and Japan while the U.S. session will feature the July ISM Manufacturing Index for the U.S. (Briefing.com consensus 49.5%; prior 49.0%), which is also expected to reflect a contraction in activity. Crude oil is on the defensive while the U.S. Dollar Index is up 0.1% at 100.08.
• Yield Check:
  • 2-yr: UNCH at 3.95%
  • 3-yr: +1 bp to 3.90%
  • 5-yr: +2 bps to 3.98%
  • 10-yr: +3 bps to 4.39%
  • 30-yr: +4 bps to 4.93%

• News:
  • Japan's Labor Ministry Council expects that the average minimum wage will increase by 6%.
  • President Trump sent letters to major drug manufacturers, requesting that they lower prices charged in the U.S.
  • China's July Caixin Manufacturing PMI hit 49.5 (expected 50.2; last 50.4).
  • Japan's July Manufacturing PMI hit 48.9 (expected 48.8; last 50.1). June jobs/applications ratio fell to 1.22 from 1.24 (expected 1.25) and June Unemployment Rate remained at 2.5%, as expected.
  • South Korea's July Manufacturing PMI hit 48.0 (last 48.7). July trade surplus reached $6.61 bln (expected surplus of $5.36 bln; last surplus of $9.08 bln) as imports grew 0.7% yr/yr (expected 2.0%; last 3.3%) and exports rose 5.9% yr/yr (expected 4.6%; last 4.3%).
  • India's July Manufacturing PMI hit 59.1 (expected 59.2; last 58.4).
  • Australia's July Manufacturing PMI hit 51.3 (last 51.6). Q2 PPI was up 0.7% qtr/qtr (expected 0.9%; last 0.9%), rising 3.4% yr/yr (last 3.7%). July Commodity Prices were down 9.0% yr/yr (last -8.7%).
  • New Zealand's June Building Consents were down 6.4% m/m (last 10.3%).
  • Eurozone's July Manufacturing PMI hit 49.8, as expected (last 49.5). July CPI was unchanged m/m (last 0.3%), rising 2.0% yr/yr (expected 1.9%; last 2.0%). July Core CPI was down 0.2% m/m (last 0.4%) but up 2.3% yr/yr, as expected (last 2.3%).
  • Germany's July Manufacturing PMI hit 49.1 (expected 49.2; last 49.2).
  • U.K.'s July Nationwide HPI was up 0.6% m/m (expected 0.5%; last -0.9%), rising 2.4% yr/yr (expected 2.1%; last 2.1%). July Manufacturing PMI hit 48.0 (expected 48.2; last 47.7).
  • France's July Manufacturing PMI hit 48.2 (expected 48.4; last 48.1).
  • Italy's July Manufacturing PMI hit 49.8 (expected 48.7; last 48.4). June Retail Sales were up 0.6% m/m (expected 0.3%; last -0.4%), rising 1.0% yr/yr (last 1.4%).
  • Spain's July Manufacturing PMI hit 51.9 (expected 51.7; last 51.4).
• Commodities:
  • WTI Crude: -0.9% to $68.65/bbl
  • Gold: +0.1% to $3353.00/ozt
  • Copper: +0.8% to $4.389/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1410
  • GBP/USD: -0.3% to 1.3159
  • USD/CNH: +0.2% to 7.2208
  • USD/JPY: -0.2% to 150.44
• Data out Today:
  • 8:30 ET: July Nonfarm Payrolls (Briefing.com consensus 102,000; prior 147,000), Nonfarm Private Payrolls (Briefing.com consensus 110,000; prior 74,000), Unemployment Rate (Briefing.com consensus 4.2%; prior 4.1%), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.2%), and Average Workweek (Briefing.com consensus 34.2; prior 34.2)
  • 9:45 ET: Final July S&P Global U.S. Manufacturing PMI (prior 52.9)
  • 10:00 ET: June Construction Spending (Briefing.com consensus 0.1%; prior -0.3%), July ISM Manufacturing Index (Briefing.com consensus 49.5%; prior 49.0%), and final July University of Michigan Consumer Sentiment (Briefing.com consensus 61.8; prior 61.8)