Bond Market Update

 Higher Start Ahead

• U.S. Treasuries are on track to continue their upbeat start to the week with longer tenors expected to show early strength after lagging yesterday. Treasury futures spent the first half of the night in a sideways range with a slight upward bias, but the advance accelerated once the focus turned to action in Europe. The overnight news flow included a rate hike from the Bank of Japan, but that move was widely expected, resulting in a muted market reaction. Economic data released overnight included mixed May growth figures from China and improved sentiment surveys from Germany and the eurozone. The U.S. session will feature a couple economic reports, followed by a $13 bln 20-yr bond reopening in the early afternoon. Crude oil has dipped toward $78/bbl while the U.S. Dollar Index is flat at 99.59.
• Yield Check:
  • 2-yr: -2 bps to 4.05%
  • 3-yr: -2 bps to 4.09%
  • 5-yr: -3 bps to 4.16%
  • 10-yr: -3 bps to 4.44%
  • 30-yr: -3 bps to 4.94%

• News:
  • The Bank of Japan raised its policy rate by 25 basis points to 1.00% and hinted at additional hikes, as expected.
  • The Reserve Bank of Australia left its cash rate at 4.35%, as expected.
  • China's May Retail Sales were down 0.6% m/m (expected -0.3%; last 0.2%), May Industrial Production rose 4.5% yr/yr (expected 4.4%; last 4.1%), May Fixed Asset Investment fell 4.1% yr/yr (expected -2.3%; last -1.6%), and May House Prices fell 3.5% yr/yr (last -3.5%). May Unemployment Rate dipped to 5.1% from 5.2% (expected 5.2%).
  • Hong Kong's May Unemployment Rate remained at 3.7%.
  • South Korea's May Import Price Index was up 24.8% yr/yr (last 20.5%) and Export Price Index was up 46.9% (last 41.3%).
  • New Zealand's May FPI was up 1.0% m/m (last 0.0%).
  • Eurozone's June ZEW Economic Index rose to 9.5 from -9.1 (expected -7.2). Q1 Eurozone Wages were up 3.4% yr/yr (last 3.0%) and Q1 Labor Cost Index was up 3.2% yr/yr (expected 3.3%; last 3.3%).
  • Germany's June ZEW Economic Sentiment rose to 10.5 from -10.2 (expected -5.8) and ZEW Current Conditions fell to -81.0 from -77.8 (expected -77.5).
  • Italy's May CPI was up 0.4% m/m, as expected (last 1.1%), rising 3.2% yr/yr, as expected (last 3.2%).
• Commodities:
  • WTI Crude: -2.9% to $78.42/bbl
  • Gold: +0.2% to $4361.20/ozt
  • Copper: +0.1% to $6.501/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1599
  • GBP/USD: UNCH at 1.3414
  • USD/CNH: UNCH at 6.7567
  • USD/JPY: UNCH at 160.34
• Data out Today:
  • 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