Bond Market Update

Quiet Start Ahead

• U.S. Treasuries are on track for a subdued start with the long bond expected to show slight relative weakness in the early going while the 2-yr note is seeking a modestly higher start. Treasury futures spent the early part of the overnight session in a slow upward climb that was largely reversed after the focus shifted to action in Europe. The overall trading volume has been reduced by holiday closures in South Korea, India, and parts of Europe, though the market received a sizable batch of economic reports from markets that were open. China's growth data for July disappointed across the board with the unemployment rate increasing to 5.2% from 5.0% (expected 5.1%) while Japan's flash Q2 GDP (0.3% qtr/qtr; expected 0.1%) beat expectations by a solid margin. The U.S. session will also see a full slate of data to end the week with July Retail Sales (Briefing.com consensus 0.5%; prior 0.6%) set to be reported at 8:30 ET, followed by July Industrial Production (Briefing.com consensus -0.1%; prior 0.3%) at 9:15 ET. President Trump is scheduled to meet with Russia's President Putin in Alaska today, but the meeting is not expected to start until 15:30 ET. Crude oil is falling toward $63.50/bbl while the U.S. Dollar Index is down 0.4% at 97.88.
• Yield Check:
  • 2-yr: -1 bp to 3.73%
  • 3-yr: UNCH at 3.70%
  • 5-yr: UNCH at 3.82%
  • 10-yr: UNCH at 4.29%
  • 30-yr: +1 bp to 4.89%

• News:
  • China's government reportedly warned foreign firms against stockpiling rare earth elements.
  • Japanese advertiser Dentsu reported mixed results an announced job cuts. · Standard & Poor's raised India's rating to BBB from BBB-.
  • China's July Industrial Production rose 5.7% yr/yr (expected 6.0%; last 6.8%), July Retail Sales increased 3.7% yr/yr (expected 4.6%; last 4.8%), July Fixed Asset Investment grew 1.6% yr/yr (expected 2.7%; last 2.8%), and July House Prices were down 2.8% yr/yr (last -3.2%). July Unemployment Rate rose to 5.2% from 5.0% (expected 5.1%).
  • Japan's Q2 GDP expanded 0.3% qtr/qtr (expected 0.1%: last 0.1%), growing 1.0% yr/yr (expected 0.4%; last 0.6%). Q2 GDP Capital Expenditure was up 1.3% qtr/qtr (expected 0.5%; last 1.0%), Q2 GDP External Demand was up 0.3% qtr/qtr (expected 0.2%: last -0.8%), Q2 GDP Private Consumption was up 0.2% qtr/qtr (expected 0.1%; last 0.2%), and Q2 GDP Price Index was up 3.0% yr/yr (expected 3.1%; last 3.3%). June Industrial Production rose 2.1% m/m (expected 1.7%; last -0.1%) while Capacity Utilization fell 1.0% m/m (last 2.0%).
  • Hong Kong's Q2 GDP expanded 0.4% qtr/qtr, as expected (last 1.9%), growing 3.1% yr/yr, as expected (last 3.0%).
  • New Zealand's July Business PMI hit 52.8 (last 48.8), July FPI was up 0.7% m/m (last 1.2%), and July Visitor Arrivals were down 2.5% m/m (last -0.5%).
  • Swiss Q2 GDP expanded 0.1% qtr/qtr (last 0.5%).
• Commodities:
  • WTI Crude: -0.7% to $63.53/bbl
  • Gold: +0.2% to $3389.60/ozt
  • Copper: -0.2% to $4.47/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1684
  • GBP/USD: +0.2% to 1.3557
  • USD/CNH: +0.1% to 7.1851
  • USD/JPY: -0.5% to 147.03
• Data out Today:
  • 8:30 ET: July Retail Sales (Briefing.com consensus 0.5%; prior 0.6%), Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.5%), August Empire State Manufacturing (Briefing.com consensus 0.0; prior 5.5), July Import Prices (prior 0.1%), Import Prices ex-oil (prior 0.1%), Export Prices (prior 0.5%), and Export Prices ex-agriculture (prior 0.5%)
  • 9:15 ET: July Industrial Production (Briefing.com consensus -0.1%; prior 0.3%) and Capacity Utilization (Briefing.com consensus 77.5%; prior 77.6%)
  • 10:00 ET: June Business Inventories (Briefing.com consensus 0.1%; prior 0.0%) and preliminary August University of Michigan Consumer Sentiment (Briefing.com consensus 61.3; prior 61.7)
  • 16:00 ET: June Net Long-Term TIC Flows (prior $259.4 bln)