Bond Market Update

Pulling Back From Recent Surge

• U.S. Treasuries are on track for a modestly lower start after two days of gains across the curve and three days of gains in longer tenors. Overnight action saw a steady retreat in the futures market as participants received a big batch of economic data from Asia and Europe. Final July Services PMI readings from major economies were better than expected with Germany's Services PMI (50.6) returning to expansion. The U.S. session will also feature the final Services PMI reading for July, which will be followed by the ISM Services (Briefing.com consensus 51.5%; prior 50.8%) report for July. The U.S. Treasury will kick off this week's note auction slate with a $58 bln 3-yr note sale at 13:00 ET. Crude oil is falling toward $65.50/bbl while the U.S. Dollar Index is up 0.2% at 98.97.
• Yield Check:
  • 2-yr: +3 bps to 3.71%
  • 3-yr: +3 bps to 3.68%
  • 5-yr: +3 bps to 3.77%
  • 10-yr: +2 bps to 4.22%
  • 30-yr: +1 bp to 4.81%

• News:
  • Japan's top trade negotiator is reportedly back in Washington, seeking a written confirmation of the trade deal reached with the U.S.
  • Expectations for the next rate hike from the Bank of Japan have reversed significantly.
  • China's Agriculture Ministry noted that this fall's grain production is expected to be pressured by floods and droughts.
  • China's July S&P Global Services PMI hit 52.6 (expected 50.4; last 50.6). 
  • Japan's July Services PMI hit 53.6 (expected 53.5; last 51.7).
  • South Korea's July CPI was up 0.2% m/m, as expected (last 0.0%), rising 2.1% yr/yr, as expected (last 2.2%).
  • India's July Services PMI hit 60.5 (expected 59.8; last 60.4).
  • Hong Kong's July Manufacturing PMI hit 49.2 (last 47.8).
  • Singapore's June Retail Sales were down 1.2% m/m (last 1.0%), rising 2.3% yr/yr (last 1.3%).
  • Australia's July ANZ Job Advertisements were down 1.0% m/m (last 1.6%) and July Services PMI hit 54.1 (expected 53.8; last 53.8).
  • New Zealand's ANZ Commodity Price Index was down 1.8% m/m (last -2.4%).
  • Eurozone's July Services PMI hit 51.0 (expected 51.2; last 50.5). June PPI was up 0.8% m/m (expected 0.9%; last -0.6%), rising 0.6% yr/yr (expected 0.5%; last 0.3%).
  • Germany's July Services PMI hit 50.6 (expected 50.1; last 49.7).
  • U.K.'s July Services PMI hit 51.8 (expected 51.2; last 52.8).
  • France's July Services PMI hit 48.5 (expected 49.7; last 49.6). June Industrial Production was up 3.8% m/m (expected 0.8%; last -0.7%). June government budget deficit reached EUR100.4 bln (last deficit of EUR94.0 bln).
  • Italy's July Services PMI hit 52.3 (expected 52.5; last 52.1).
  • Spain's July Services PMI hit 55.1 (expected 52.6; last 51.9) and June Industrial Production was up 2.3% yr/yr (last 1.7%).
• Commodities:
  • WTI Crude: -1.0% to $65.62/bbl
  • Gold: -0.6% to $3405.70/ozt
  • Copper: -0.6% to $4.413/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1534
  • GBP/USD: -0.1% to 1.3273
  • USD/CNH: +0.2% to 7.1907
  • USD/JPY: +0.4% to 147.63
• Data out Today:
  • 8:30 ET: June Trade Balance (Briefing.com consensus -$62.0 bln; prior -$71.5 bln) 
  • 9:45 ET: Final July S&P Global U.S. Services PMI (prior 52.9)
  • 10:00 ET: July ISM Services (Briefing.com consensus 51.5%; prior 50.8%)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results