Bond Market Update

Longer Tenors Maintain Lead

• U.S. Treasuries trade on their highs with continued relative strength in longer tenors pressuring yields on 10s and 30s past yesterday's lows while yields on shorter tenors are nearing yesterday's lows. The market faced some selling in immediate reaction to the PPI report for May (1.1%; Briefing.com consensus 0.7%), which was hotter-than-expected, but it also included a downward revision to April's reading. As a result, the year-over-year rate for PPI accelerated to 6.5% from 5.7%, but on the positive side, Core PPI (0.4%; Briefing.com consensus 0.4%), also included a downward revision to April, which left the year-over-year rate at 4.9% for the second consecutive month after April's reading was revised down from 5.2%. Post-PPI selling briefly sent Treasuries into the red, but an ensuing rebound lifted the complex back into positive territory. Equities are off to a higher start with the S&P 500 (+0.3%) trimming this week's loss to 1.3%.
• Yield Check:
  • 2-yr: UNCH at 4.13%
  • 3-yr: UNCH at 4.18%
  • 5-yr: -1 bp to 4.25%
  • 10-yr: -2 bps to 4.52%
  • 30-yr: -3 bps to 5.00%