Bond Market Update

Short End Ahead

• U.S. Treasuries are on track for a modestly higher start in shorter tenors and a lower open in the long end after Friday's big post-NFP rally. Treasury futures dipped on Sunday evening, reaching their lowest levels shortly after the start of the European session. Overnight trade unfolded at a slow pace with Treasuries inching up off their lows in steady fashion. The overnight data flow was on the light side and things will remain fairly quiet during the U.S. session. Switzerland's President Keller-Sutter said that her government reached out to the Trump administration after the U.S. announced a 39% tariff on imports from Switzerland. In other news, oil is returning to $66/bbl after OPEC+ agreed to increase its output starting in September. The U.S. Dollar Index is down 0.4% at 98.80, reversing some of last week's rally with its 50-day moving average (98.29) looming below.
• Yield Check:
  • 2-yr: -2 bps to 3.68%
  • 3-yr: -1 bp to 3.66%
  • 5-yr: -1 bp to 3.76%
  • 10-yr: UNCH at 4.22%
  • 30-yr: +2 bps to 4.83%

• News:
  • President Trump will appoint a new Fed Governor after Adriana Kugler submitted her resignation, effective August 8.
  • Japan's Prime Minister Ishiba said that the Japanese government is ready to compile an extra budget if necessary.
  • The Wall Street Journal reported that China is holding back the supply of critical minerals to Western defense contractors.
  • Officials from Japan and South Korea said that trade deals with the U.S. are not on paper yet and that details still need to be ironed out.
  • There are growing expectations that the Bank of England will start implementing 25-basis point cuts to its bank rate on a quarterly basis.
  • Japan's July Monetary Base fell 3.7% yr/yr (last -3.3%).
  • Australia's July MI Inflation Gauge was up 0.9% m/m (last 0.1%).
  • Eurozone's August Sentix Investor Confidence fell to -3.7 from 4.5 (expected 6.2).
  • Spain's July unemployment decreased by 1,400 (expected -21,300; last -48,900).
  • Swiss July CPI was unchanged m/m (expected -0.2%; last 0.2%), rising 0.2% yr/yr (expected 0.1%; last 0.1%). July Manufacturing PMI hit 48.8 (expected 49.8; last 49.6).
• Commodities:
  • WTI Crude: -1.9% to $66.03/bbl
  • Gold: +0.6% to $3421.10/ozt
  • Copper: +0.2% to $4.444/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1568
  • GBP/USD: +0.1% to 1.3295
  • USD/CNH: -0.2% to 7.1808
  • USD/JPY: UNCH at 147.37
• Data out Today:
  • 10:00 ET: June Factory Orders (Briefing.com consensus -5.1%; prior 8.2%)