Bond Market Update

 Pressured Again

• U.S. Treasuries are on track for a lower start with shorter tenors expected to pace the early selling. Treasury futures spent the bulk of the night in a sideways range with a slight downside bias, sliding to lows in early morning trade alongside a rebound in the price of oil. The modest weakness in Treasury futures comes after a night that saw a mixed showing from Asian equities, including a rebound in South Korea's Kospi (+8.4%), and selling in Europe after the release of weak flash PMI readings for May. Germany's Manufacturing PMI (49.9), France's Manufacturing PMI (48.9), and U.K.'s Services PMI (47.9) came in below 50.0, reflecting a contraction. The market also received a weak April jobs report from Australia while the U.S. session will feature the release of April Housing Starts (Briefing.com consensus 1.420 mln; prior 1.502 mln) and Building Permits (Briefing.com consensus 1.380 mln; prior 1.372 mln) at 8:30 ET. The U.S. Dollar Index is up 0.2% at 99.27.
• Yield Check:
  • 2-yr: +6 bps to 4.10%
  • 3-yr: +6 bps to 4.17%
  • 5-yr: +5 bps to 4.28%
  • 10-yr: +4 bps to 4.61%
  • 30-yr: +2 bps to 5.14%

• News:
  • Japan's extra budget is expected to reach JPY3 trillion, but Prime Minister Takaichi has not confirmed that amount yet.
  • Bank Indonesia raised its policy rate by 50 basis points to 5.25% against expectations for a smaller increase.
  • European Central Bank policymaker Rehn said that a rate hike may be needed to preserve credibility.
  • Japan's flash May Manufacturing PMI hit 54.5, as expected (last 55.1) and flash Services PMI hit 50.0 (last 51.0). April trade surplus reached JPY240 bln (expected deficit of JPY230 bln; last surplus of JPY90 bln) as imports grew 9.7% yr/yr (expected 8.3%; last 10.9%) and exports rose 14.8% yr/yr (expected 9.3%; last 11.5%). March Core Machinery Orders were down 9.4% m/m (expected -7.7%; last 13.6%) but up 5.9% yr/yr (expected 4.5%; last 24.7%).
  • South Korea's April PPI was up 2.5% m/m (last 1.7%), rising 6.9% yr/yr (last 4.1%).
  • Hong Kong's April CPI was down 0.1% m/m (last 0.0%), rising 1.7% yr/yr (last 1.7%).
  • Australia's flash May Manufacturing PMI 50.2 (last 51.3) and flash Services PMI hit 47.7 (last 50.7). April Employment decreased by 18,600 (expected 16,700; last 23,300) and full Employment Change decreased by 10,700 (last 63,400). April Unemployment Rate rose to 4.5% from 4.3% (expected 4.3%) and April Participation Rate dipped to 66.7% from 66.8% (expected 66.8%). April Credit Card Spending was up 2.9% yr/yr (last 2.1%).
  • New Zealand's April trade surplus reached NZD1.92 bln (expected NZD980 mln; last NZD430 mln).
  • India's flash May Manufacturing PMI hit 54.3 (last 54.7) and flash Services PMI hit 58.9 (last 58.8).
  • Eurozone's flash May Manufacturing PMI hit 51.4 (expected 51.7; last 52.2) and flash Services PMI hit 46.4 (expected 47.8; last 47.6). March Current Account surplus reached EUR14.9 bln (expected EUR26.3 bln; last EUR25.6 bln). Q1 Labor Cost Index was up 3.3% yr/yr (last 3.3%) and March Construction Output was up 0.78% m/m (last -0.77%).
  • Germany's flash May Manufacturing PMI hit 49.9 (expected 51.0; last 51.4) and flash Services PMI hit 47.8 (expected 47.1; last 46.9).
  • U.K.'s flash May Manufacturing PMI hit 53.7 (expected 52.9; last 53.7) and flash Services PMI hit 47.9 (expected 51.7; last 52.7).
  • France's flash May Manufacturing PMI hit 48.9 (expected 52.1; last 52.8) and flash Services PMI hit 42.9 (expected 46.6; last 46.5).
  • Swiss Q1 Industrial Production was down 7.1% yr/yr (expected 0.5%; last -0.4%).
• Commodities:
  • WTI Crude: +2.3% to $100.53/bbl
  • Gold: -0.5% to $4515.10/ozt
  • Copper: -1.1% to $6.26/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1597
  • GBP/USD: -0.1% to 1.3420
  • USD/CNH: +0.1% to 6.8050
  • USD/JPY: +0.2% to 159.16
• Data out Today:
  • 8:30 ET: April Housing Starts (Briefing.com consensus 1.420 mln; prior 1.502 mln), Building Permits (Briefing.com consensus 1.380 mln; prior 1.372 mln), weekly Initial Claims (Briefing.com consensus 210,000; prior 211,000), Continuing Claims (prior 1.782 mln), and May Philadelphia Fed survey (Briefing.com consensus 15.5; prior 26.7)
  • 9:45 ET: Flash May S&P Global U.S. Manufacturing PMI (prior 54.5) and flash Services PMI (prior 51.0)
  • 10:30 ET: Weekly natural gas inventories (prior +85 bcf)