Bond Market Update

 Trimming Last Week's Gains

• U.S. Treasuries are on track for a mostly lower start after last week's rally across the curve. Treasury futures slumped out of the gate on Sunday evening while oil rallied back above $90/bbl amid some renewed concerns surrounding negotiations with Iran after the U.S. carried out strike against Iran over the weekend. Negotiations are still continuing, according to reports, but the weekend developments have exerted some pressure on sentiment, though equity futures have evaded the weakness, pointing to a higher start on Wall Street. The overnight session brought a big batch of data to begin the month with China's official Manufacturing (50.0) and Non-Manufacturing (50.1) readings essentially pointing to a standstill while the eurozone's reading (51.6) came in above 50.0, reflecting an expansion. The U.S. session will also feature the final May Manufacturing PMI, followed by May ISM Manufacturing Index (Briefing.com consensus 53.1%; prior 52.7) at 10:00 ET. Crude oil is back above $90/bbl while the U.S. Dollar Index is up 0.2% at 99.07.
• Yield Check:
  • 2-yr: +2 bps to 4.03%
  • 3-yr: +2 bps to 4.08%
  • 5-yr: +2 bps to 4.17%
  • 10-yr: +1 bp to 4.46%
  • 30-yr: -1 bp to 4.98%

• News:
  • European Central Bank policymaker Schnabel lamented high energy prices while policymaker Pereira repeated that the central bank should act sooner rather than later.
  • China's May Manufacturing PMI hit 50.0 (expected 50.2; last 50.3) and Non-Manufacturing PMI hit 50.1 (expected 49.5; last 49.4). RatingDog Manufacturing PMI hit 51.8 (expected 51.4; last 52.2).
  • Japan's Q1 Capital Spending was unchanged qtr/qtr (expected 4.1%; last 6.5%) and May Manufacturing PMI hit 54.5, as expected (last 55.1).
  • South Korea's May trade surplus reached $26.95 bln (expected surplus of $24.30 bln; last surplus of $23.76 bln) as imports grew 20.8% yr/yr (expected 21.5%; last 16.7%) and exports rose 53.2% yr/yr (expected 48.4%; last 48.0%). May Manufacturing PMI hit 54.8 (last 53.6).
  • Australia's May Manufacturing PMI hit 50.7 (expected 50.2; last 51.3). May MI Inflation Gauge was down 0.3% m/m (last 0.6%) and May ANZ Job Advertisements rose 1.8% m/m (last -0.6%). May Commodity Prices were up 16.8% yr/yr (last 15.1%).
  • India's May Manufacturing PMI hit 55.0 (expected 54.3; last 54.7).
  • Eurozone's May Manufacturing PMI hit 51.6 (expected 51.4; last 52.2). April Unemployment Rate remained at 6.3% (expected 6.2%). April Private Sector Loans rose 3.0% yr/yr, as expected (last 3.0%), and loans to nonfinancials rose 3.4% yr/yr (expected 3.1%; last 3.2%).
  • Germany's April Retail Sales were down 0.3% m/m (expected -0.4%; last -0.3%), falling 0.3% yr/yr (last 2.7%). May Manufacturing PMI hit 50.1 (expected 49.9; last 51.4).
  • U.K.'s May Nationwide HPI was down 0.6% m/m (expected -0.1%; last 0.4%) but up 1.7% yr/yr (last 3.0%). May Manufacturing PMI hit 53.9 (expected 53.7; last 53.7).
  • France's May Manufacturing PMI hit 49.7 (expected 48.9; last 52.8).
  • Italy's May Manufacturing PMI hit 52.9 (expected 52.0; last 52.1).
  • Spain's May Manufacturing PMI hit 51.2 (expected 53.7; last 51.7).
  • Swiss Q1 GDP expanded 0.7% qtr/qtr (expected 0.5%; last 0.2%), growing 0.5% yr/yr (last 1.0%). April Retail Sales were up 1.6% yr/yr (expected 0.2%; last 1.3%). May Manufacturing PMI hit 57.3 (expected 54.0; last 54.5).
• Commodities:
  • WTI Crude: +3.5% to $90.42/bbl
  • Gold: -1.2% to $4537.00/ozt
  • Copper: +2.9% to $6.57/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1647
  • GBP/USD: +0.2% to 1.3466 
  • USD/CNH: UNCH at 6.7640
  • USD/JPY: +0.1% to 159.49
• Data out Today:
  • 9:45 ET: Final May S&P Global U.S. Manufacturing PMI (prior 55.3)
  • 10:00 ET: April Construction Spending (prior 0.6%) and May ISM Manufacturing Index (prior 52.7)