Bond Market Update

Quiet Start to New Week

• Longer-dated Treasuries started the week on a modestly higher note while the 2-yr note lagged slightly, spending the session near its unchanged level. The Monday session was very quiet, as the market did not receive any top-tier data from the U.S. while the international data flow was also light. China narrowly avoided another deflationary reading of its CPI in July (0.0% yr/yr; expected -0.1%) while PPI (-3.6% yr/yr; expected -3.4%) remained in deflation for the 34th consecutive month. Treasuries faced some light pressure after their higher start, but the market found support near Friday's closing levels. The rest of the morning saw a slow bounce that eventually lifted action to fresh highs, but late trade saw a dip toward the day's starting levels. President Trump said in the late afternoon that the reduced tariff rates with China will be maintained for another 90 days to continue negotiations, but the reaction in the market was muted. Tomorrow's session will feature the July CPI (Briefing.com consensus 0.2%; prior 0.3%) report at 8:30 ET. Crude oil returned to $64/bbl while the U.S. Dollar Index rose 0.3% to 98.52.
• Yield Check:
  • 2-yr: -1 bp to 3.75%
  • 3-yr: -1 bp to 3.72%
  • 5-yr: -1 bp to 3.82%
  • 10-yr: -1 bp to 4.27%
  • 30-yr: -1 bp to 4.84%

• News:
  • Fed Governor Bowman (FOMC voter) supports three rate cuts this year.
  • President Trump aims to meet with Russia's President Putin in Alaska on Friday.
  • President Trump expressed hope that China will significantly increase its soybean purchases from the U.S.
  • South Korea's exports through the first ten days of August were down 4.3% yr/yr but chip exports rose 12.0%.
  • The U.S. government will charge NVIDIA (NVDA) and AMD (AMD) 15% of their revenue generated in China.
  • Treasury Secretary Bessent said that he expects trade issues to be largely sorted out by the end of October.
  • British Chancellor Reeves is reportedly considering a tax hike in the Autumn budget, though she previously pledged not to increase taxes on income, national insurance, and value-added.
  • China's July CPI was up 0.4% m/m (expected 0.3%; last -0.1%) and was unchanged yr/yr (expected -0.1%; last 0.1%). July PPI was down 3.6% yr/yr (expected -3.4%; last -3.6%).
  • Italy's July CPI was up 0.4% m/m, as expected (last 0.2%), rising 1.7% yr/yr, as expected (last 1.7%). June trade surplus reached EUR5.41 bln (expected surplus of EUR7.12 bln; last surplus of EUR6.10 bln).
• Commodities:
  • WTI crude: +0.2% to $64.00/bbl
  • Gold: -2.5% to $3404.90/ozt
  • Copper: -0.7% to $4.44/lb
• Currencies: 
  • EUR/USD: -0.3% to 1.1609
  • GBP/USD: -0.1% to 1.3432
  • USD/CNH: +0.1% to 7.1945
  • USD/JPY: +0.3% to 148.15
• The Day Ahead:
  • 6:00 ET: July NFIB Small Business Optimism Index (prior 98.6)
  • 8:30 ET: July CPI (Briefing.com consensus 0.2%; prior 0.3%) and Core CPI (Briefing.com consensus 0.1%; prior 0.3%)
  • 14:00 ET: July Treasury Budget (Briefing.com consensus -$140.0 bln; prior $27.0 bln)