Bond Market Update

Mixed Start in Sight

• U.S. Treasuries are on track for a mixed start with the long bond expected to show relative weakness after outperforming yesterday while the short end is set for a modestly higher start. The Treasury complex spiked to highs in early evening trade after President Trump fired Fed Governor Cook amid an investigation into mortgage fraud after Ms. Cook refused to resign. Separately, President Trump threated to impose additional tariffs on exports from countries that have digital service taxes. Treasury futures backed down from their highs swiftly with longer tenors slipping past levels from evening trade while the short end has defended roughly half of last night's gain. Overseas, British gilt yields are approaching their highest levels of the year amid concerns about the U.K.'s fiscal standing leading into the Autumn budget, which is likely to include tax hikes. Crude oil is giving back yesterday's gain while the U.S. Dollar Index is down 0.2% at 98.28.
• Yield Check:
  • 2-yr: -3 bps to 3.70%
  • 3-yr: -3 bps to 3.65%
  • 5-yr: -2 bps to 3.77%
  • 10-yr: UNCH at 4.28%
  • 30-yr: +3 bps to 4.92%

• News:
  • South Korea's President Lee met with President Trump yesterday, confirming that South Korean companies will invest $150 bln into the U.S. as part of a trade deal.
  • President Trump threatened to impose a 200% tariff on imports from China if China does not accelerate exports of rare-earth magnets.
  • The latest policy minutes from the Reserve Bank of Australia showed an agreement that policy is still somewhat restrictive and that the pace of cuts will be determined by incoming data and the balance of global risks.
  • French Finance Minister Lombard cautioned that the IMF could intervene if Prime Minister Bayrou's minority government does not survive a confidence vote in two weeks.
  • Japan's July Corporate Services Price Index was up 2.9% yr/yr (expected 3.2%; last 3.2%). June BoJ Core CPI was up 2.0% yr/yr (expected 2.4%; last 2.3%).
  • South Korea's August Consumer Confidence fell to 111.4 from 143.0.
  • Singapore's July Industrial Production was up 8.2% m/m (expected 1.1%; last -0.8%).
  • Hong Kong's July trade deficit reached HKD34.1 bln (last deficit of HKD58.9 bln) as imports grew 16.5% m/m (last 11.1%) and exports rose 14.3% m/m (last 11.9%).
  • France's August Consumer Confidence dipped to 87 from 88 (expected 90).
• Commodities:
  • WTI Crude: -1.7% to $63.68/bbl
  • Gold: +0.3% to $3426.30/ozt
  • Copper: -0.7% to $4.446/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1659
  • GBP/USD: +0.3% to 1.3490
  • USD/CNH: +0.1% to 7.1591 
  • USD/JPY: -0.2% to 147.42
• Data out Today:
  • 8:30 ET: July Durable Orders (Briefing.com consensus -3.5%; prior -9.3%) and Durable Orders ex-transport (Briefing.com consensus 0.1%; prior 0.2%)
  • 9:00 ET: June FHFA Housing Price Index (Briefing.com consensus -0.1%; prior -0.2%) and June S&P Case-Shiller Home Price Index (Briefing.com consensus 2.8%; prior 2.8%)
  • 10:00 ET: August Consumer Confidence (Briefing.com consensus 96.3; prior 97.2)
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results