Bond Market Update

 Quiet Start Ahead

• U.S. Treasuries are on track for a flat start after a quiet night in the futures market. Treasury futures dipped out of the gate, spending the night in a sideways range before seeing some brief strength after the start of the European session. President Trump said that the U.S. made "a great settlement" with Iran while Israel's Prime Minister Netanyahu said that Israel is not a party to the U.S.-Iran agreement. However, capital markets have maintained a positive tone. Overnight action saw the release of a modest batch of data, which included solid May total social financing figures from China and an in-line reading of the U.K.'s GDP for April (-0.1% month-over-month). Crude oil has deepened its pullback, falling to a level not seen since mid-April while the U.S. Dollar Index is down 0.1% at 99.74.
• Yield Check:
  • 2-yr: -1 bp to 4.06%
  • 3-yr: -1 bp to 4.11%
  • 5-yr: -1 bp to 4.18%
  • 10-yr: UNCH at 4.46%
  • 30-yr: +1 bp to 4.96%

• News:
  • The Bank of Japan is expected to announce its next rate hike next week while the Reserve Bank of Australia is expected to announce a policy hold.
  • Bank of Korea Governor Shin said that interest rates need to be raised "before it is too late."
  • The market expects the European Central Bank to hold its policy steady in July unless there is a renewed rise in energy prices.
  • Germany's Economic Ministry noted that momentum in the domestic economy slowed notably in Q2.
  • China's May New Loans reached CNY520.0 bln (expected CNY450.0 bln; last -CNY10.0 bln), May Outstanding Loan grew 5.5% yr/yr, as expected (last 5.6%), and May total social financing reached CNY2.03 trln (expected CNY1.87 trln; last CNY620.0 bln).
  • Japan's April Industrial Production was up 0.5% m/m (expected 0.8%; last -0.4%) and Capacity Utilization was down 0.8% m/m (last -1.2%).
  • New Zealand's May Business PMI hit 49.9 (last 50.4).
  • Germany's final May CPI was down 0.2% m/m, as expected (last 0.6%) but up 2.6% yr/yr, as expected (last 2.9%).
  • U.K.'s April GDP contracted 0.1% m/m, as expected (last 0.3%) but was up 1.2% yr/yr (expected 1.3%; prior 1.2%). April Manufacturing Production was up 0.4% m/m (expected -0.2%; last 1.2%), April trade deficit reached GBP26.05 bln (expected deficit of GBP22.50 bln; last deficit of GBP27.22 bln), April Industrial Production was unchanged m/m (expected 0.1%; last -0.2%), falling 0.2% yr/yr (expected -0.1%; last 0.0%). April Manufacturing Production was up 0.4% m/m (expected -0.2%; last 1.2%), rising 1.0% yr/yr (expected 0.4%; last 1.2%).
  • France's final May CPI was up 0.1% m/m, as expected (last 1.0%), rising 2.4% yr/yr, as expected (last 2.2%).
  • Spain's May CPI was up 0.1% m/m, as expected (last 0.4%), rising 3.2% yr/yr, as expected (last 3.2%). May Core CPI was up 3.0% yr/yr (expected 2.9%; last 2.8%).
• Commodities:
  • WTI Crude: -3.6% to $84.55/bbl
  • Gold: +2.7% to $4225.00/ozt
  • Copper: +1.8% to $6.385/lb
• Currencies:
  • EUR/USD: UNCH at 1.1576
  • GBP/USD: UNCH at 1.3416
  • USD/CNH: UNCH at 6.7625
  • USD/JPY: +0.1% to 160.13
• Data out Today:
  • 10:00 ET: Preliminary June University of Michigan Consumer Sentiment (Briefing.com consensus 46.2; prior 44.8)