Bond Market Update

 Long End Ahead

• U.S. Treasuries are on track for a higher start with longer tenors expected to show relative strength in the early going after a steady advance in the futures market. Treasury futures began rising shortly after yesterday's cash close, maintaining their upward path into the night. There was some overnight improvement in risk sentiment even though the U.S. bombed multiple targets in Iran, in line with President Trump's warning. Crude oil, however, remains below $90/bbl after an overnight push toward $94/bbl. The overnight session was light on economic data while the U.S. slate will see the release of weekly Initial Claims (Briefing.com consensus 222,000; prior 215,000) and May PPI (Briefing.com consensus 0.7%; prior 1.4%). On a side note, the European Central Bank is widely expected to announce a 25-basis point rate hike at 8:15 ET, though it is unclear if President Lagarde will hint at additional hikes in her press conference. The U.S. Dollar Index is up 0.1% at 100.05, remaining near its highest level since early April.
• Yield Check:
  • 2-yr: -1 bp to 4.12%
  • 3-yr: -1 bp to 4.17%
  • 5-yr: -1 bp to 4.25%
  • 10-yr: -2 bps to 4.52%
  • 30-yr: -3 bps to 5.00%

• News:
  • Bank of Japan Governor Ueda will miss next week's policy meeting due to hospitalization, but the market remains confident that a rate hike will be announced.
  • South Korea's exports were up 86% yr/yr through the first ten days of June, with chip exports jumping 206%.
  • Germany's farm cooperative increased its wheat harvest forecast for the year due to good weather.
  • Japan's Q2 BSI Large Manufacturing Conditions fell to -1.8 from 3.8 (expected 4.2).
  • South Korea's May Unemployment Rate remained at 2.8%. · Australia's June MI Inflation Expectations slowed to 5.5% from 5.6%.
• Commodities:
  • WTI Crude: -1.4% to $88.75/bbl
  • Gold: -0.6% to $4107.20/ozt
  • Copper: -0.3% to $6.251/lb
• Currencies:
  • EUR/USD: UNCH at 1.1538
  • GBP/USD: UNCH at 1.3364
  • USD/CNH: UNCH at 6.7786
  • USD/JPY: UNCH at 160.52
• Data out Today:
  • 8:30 ET: May PPI (Briefing.com consensus 0.7%; prior 1.4%), Core PPI (Briefing.com consensus 0.4%; prior 1.0%), weekly Initial Claims (Briefing.com consensus 222,000; prior 215,000), and Continuing Claims (prior 1.786 mln)
  • 10:30 ET: Weekly natural gas inventories (prior +95 bcf)
• Treasury Auctions:
  • 13:00 ET: $22 bln 30-yr Treasury bond reopening results