Bond Market Update

Lower Start Ahead

• U.S. Treasuries are on track for a modestly lower start after a recent slide from their overnight highs. Treasury futures crawled higher through the Asian session, but the entire advance was reversed around 7:00 ET. That said, the overnight range was narrow, leaving Treasuries on track to start the cash session just below yesterday's closing levels. The market is likely to see some early volatility in response to the 8:30 ET release of May CPI (Briefing.com consensus 0.5%; prior 0.6%) and Core CPI (Briefing.com consensus 0.3%; prior 0.4%), which will factor into rate expectations. The fed funds futures market is currently eyeing December as the likely time for the next rate change, which is currently expected to be a rate hike. The overnight session was fairly quiet, though it is worth noting that Bank of Japan Governor Ueda will miss next week's policy meeting due to a hospitalization, but the market still expects that a rate hike will be announced on Tuesday. Crude oil is rising back above $90/bbl while the U.S. Dollar Index is flat at 99.94.
• Yield Check:
  • 2-yr: +2 bps to 4.14%
  • 3-yr: +2 bps to 4.20%
  • 5-yr: +2 bps to 4.27%
  • 10-yr: +1 bp to 4.54%
  • 30-yr: +1 bp to 5.02%

• News:
  • President Trump said that he may order additional strikes on Iran.
  • Japan's Ministry of Finance sold 30-yr JGBs to weak demand, but the cash market held up well despite the poor sale.
  • Japan's largest banks plan to launch live stablecoin transactions in fiscal 2026/27.
  • There was some ongoing focus on China's reported plan to spend nearly $300 bln on building data centers over the next five years.
  • Germany's Institute of Economic Research noted that the domestic economy is expected to contract in Q2 and Q3.
  • China's May CPI was down 0.1% m/m (expected -0.2%; last 0.3%) but up 1.2% yr/yr (expected 1.3%; last 1.2%). May PPI was up 3.9% yr/yr, as expected (last 2.8%).
  • Japan's May PPI was up 0.9% m/m (expected 0.5%; last 2.8%), rising 6.3% yr/yr (expected 5.6%; last 5.3%).
  • Australia's April Building Approvals were down 3.4% m/m, as expected (last -10.5%) but up 10.2% yr/yr, as expected (last 9.0%). April Private House Approvals were down 1.0% m/m, as expected (last 0.5%).
  • Italy's April Industrial Production was up 0.5% m/m (expected 0.0%; last 0.6%), rising 1.3% yr/yr (last 1.4%).
• Commodities:
  • WTI Crude: +2.2% to $90.14/bbl
  • Gold: -2.5% to $4179.80/ozt
  • Copper: -1.3% to $6.243/lb
• Currencies:
  • EUR/USD: UNCH at 1.1539
  • GBP/USD: +0.1% to 1.3383
  • USD/CNH: +0.1% to 6.7827
  • USD/JPY: +0.1% to 160.49
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 10.8%; prior -2.3%)
  • 8:30 ET: May CPI (Briefing.com consensus 0.5%; prior 0.6%) and Core CPI (Briefing.com consensus 0.3%; prior 0.4%)
  • 10:30 ET: Weekly crude oil inventories (prior -7.97 mln)
  • 14:00 ET: May Treasury Budget (prior $215.0 bln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results