Bond Market Update

Looming Deal Signing Offers Monday Boost

• U.S. Treasuries started the week on a positive note, though some intraday backtracking left the complex with only a portion of its initial gains. The trading day started with gains across the curve, briefly pressuring the 30-yr yield to its lowest level since early May while yields on shorter tenors revisited their June lows. The upbeat start followed news that the U.S.-Iran peace deal is expected to be signed on Friday. The two sides will continue negotiations regarding Iran's nuclear program during a 60-day period that will follow the signing, but capital markets still had a decidedly positive start to the week. The Dow set a fresh record high, S&P 500 and Nasdaq returned to record territory, while crude oil fell to $80/bbl and is now just $15/bbl higher than it traded before the start of the military campaign against Iran. Oil spent the day near its morning low, offering support to overall sentiment while Treasuries briefly climbed above their starting levels during the first 90 minutes of trade, but they returned to their opening levels by midday, deepening their pullback from highs during the last couple hours of action. However, even with that pullback, 10s and shorter tenor finished comfortably in positive territory while the long bond added a couple ticks. Crude oil settled at its lowest level since early March while the U.S. Dollar Index slipped 0.1% to 99.61.
• Yield Check:
  • 2-yr: -2 bps to 4.07%
  • 3-yr: -2 bps to 4.11%
  • 5-yr: -3 bps to 4.19%
  • 10-yr: -2 bps to 4.47%
  • 30-yr: UNCH at 4.97%

• News:
  • President Trump is attending the G-7 summit in France through Wednesday.
  • NVIDIA (NVDA) will issue $20 bln of debt, adding to a string of recent bond sales from big tech companies.
  • China Securities Journal reported that the Chinese government will accelerate IPOs for technology companies.
  • The Bank of Japan is expected to announce a 25-basis point rate hike overnight.
  • The Reserve Bank of Australia is expected to hold its policy steady overnight.
  • NZIER lowered its forecast for New Zealand's 2026 growth to 0.6% from 0.8% while the outlook for 2027 was lowered to 1.6% from 3.0%.
  • The U.K. will hold another by-election on Thursday, which could trigger a leadership challenge to Prime Minister Starmer.
  • market has curtailed its rate hike expectations for the U.K., now pricing in just one rate hike before the end of the year.
  • President Trump said that France has to rescind its tech sales tax or face a 100% tariff on wine imports to the U.S.
  • Japan's April Tertiary Industry Activity fell to -10.6 from 16.0.
  • South Korea's May trade surplus reached $27.04 bln (expected surplus of $26.95 bln; last surplus of $23.76 bln) as imports grew 20.7% yr/yr (expected 20.8%; last 16.7%) and exports jumped 53.4% (expected 53.2%; last 48.0%).
  • India's May WPI Inflation was up 9.68% yr/yr (expected 9.10%; last 8.26%) and May trade deficit reached $28.21 bln (last deficit of $28.38 bln).
  • New Zealand's May Electronic Card Sales Retail Sales were up 1.7% m/m (last -1.2%), rising 3.3% yr/yr (last 2.0%).
  • Singapore's Q1 Unemployment Rate remained at 2.0% (expected 2.1%).
  • Eurozone's April Industrial Production was up 0.1% m/m (expected 0.2%; last 0.4%), rising 0.3% yr/yr (last -2.8%).
  • Germany's May WPI was down 0.6% m/m (expected 0.8%; last 2.0%) but up 5.9% yr/yr (last 6.3%).
  • Italy's April trade surplus reached EUR4.293 bln (expected surplus of EUR5.190 bln; last surplus of EUR4.709 bln).
  • Swiss May PPI was down 0.4% m/m (expected 0.4%; last 0.8%), falling 1.8% yr/yr (last -2.0%). May SECO Consumer Climate rose to -38 from -40, as expected.
• Today's Data:
  • Industrial production increased just 0.1% month-over-month in May (Briefing.com consensus: 0.2%) following an upwardly revised 0.9% increase (from 0.7%) in April. The capacity utilization rate was 76.2% (Briefing.com consensus: 76.2%), up from 76.1% in April. Total industrial production was up 1.7% year-over-year. The capacity utilization rate was 3.2 percentage points below its long-run average.
    • The key takeaway from the report is that manufacturing output moved sideways in May, reflecting a cooling down after some solid activity in April.
  • The Empire State Manufacturing Index fell to 5.7 in June (Briefing.com consensus 12.5) from 19.6 in May.
  • The NAHB Housing Market Index fell to 35 in June (Briefing.com consensus 37) from 37 in May.
• Commodities:
  • WTI crude: -4.7% to $80.90/bbl
  • Gold: +2.6% to $4.351.20/ozt
  • Copper: +0.8% to $6.49/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1590
  • GBP/USD: +0.1% to 1.3414
  • USD/CNH: UNCH at 6.7598
  • USD/JPY: +0.1% to 160.33
• The Day Ahead:
  • 8:30 ET: May Housing Starts (Briefing.com consensus 1.440 mln; prior 1.465 mln), Building Permits (Briefing.com consensus 1.410 mln; prior 1.442 mln), May Import Prices (prior 1.9%), Import Prices ex-oil (prior 0.8%), Export Prices (prior 3.3%), and Export Prices ex-agriculture (prior 3.4%)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results