Bond Market Update

Ticking Lower After Quiet Night

• U.S. Treasuries are on track for a slightly lower start after a quiet night in the futures market. Treasury futures inched higher during the Asian session, but the slight gains were reversed at the start of the European session, resulting in a narrow overall range. Meanwhile, other sovereign debt outperformed while global equities had a mostly upbeat showing. The market has maintained a sense of optimism surrounding the Iran deal, suggesting that the intense focus on the price of oil should recede in the coming days as shipping routes normalize and Iranian supply enters the energy market. Economic data released overnight included eurozone's final CPI report for May. Meanwhile, the U.K.'s inflation report showed an acceleration to 2.6% from 2.5% in year-over-year Core CPI ahead of tomorrow's policy decision from the Bank of England. The market does not expect a rate hike announcement even though the London Times Shadow monetary policy committee voted 5-4 in favor of a hike. Back at home, Fed Chairman Warsh will take part in his first post-FOMC press conference this afternoon. The market does not expect any changes to be announced, but the policy statement will be closely studied for changes in language and tone compared to the April statement. Crude oil hovers near $76/bbl while the U.S. Dollar Index is up 0.2% at 99.69.
• Yield Check:
  • 2-yr: +1 bp to 4.06%
  • 3-yr: +1 bp to 4.10%
  • 5-yr: +2 bps to 4.17%
  • 10-yr: +1 bp to 4.44%
  • 30-yr: +1 bp to 4.94%

• News:
  • China's annual forum on national financial issues started today and will continue tomorrow. People's Bank of China Governor Pan said that China's low-yield environment will be addressed through adjusting overnight reverse repurchase operations.
  • Reserve Bank of Australia Assistant Governor Jones said that the country's financial system needs to be prepared for potential shocks.
  • The Bank of France lowered its domestic growth forecast for 2026 to 0.5% from 0.9%.
  • Japan's May trade deficit reached JPY90 bln (expected deficit of JPY210 bln; last deficit of JPY200 bln) as imports grew 12.5% yr/yr (expected 12.8%; last 9.8%) and exports jumped 17.0% yr/yr (expected 16.2%; last 14.8%). June Reuters Tankan Index rose to 13 from 8. April Core Machinery Orders were up 8.7% m/m (expected 1.2%; last 9.8%), rising 15.6% yr/yr (expected 9.3%; last 5.9%).
  • Australia's May MI Leading Index was unchanged m/m (last 0.1%).
  • New Zealand's Q1 Current Account deficit reached 3.6% of GDP (prior deficit 3.7% of GDP). Q2 Westpac Consumer Sentiment fell to 80.4 from 94.7.
  • Singapore's May trade surplus reached SGD5.57 bln (last surplus of SGD13.13 bln) as non-oil exports rose 7.7% yr/yr (last 11.0%), jumping 38.4% yr/yr (expected 30.0%; last 24.4%).
  • Eurozone's final May CPI was up 0.1% m/m, as expected (last 1.0%), rising 3.2% yr/yr, as expected (last 3.0%). May Core CPI was up 0.3% m/m, as expected (last 0.9%), rising 2.6% yr/yr (expected 2.5%: last 2.2%).
  • U.K.'s May CPI was up 0.2% m/m (expected 0.4%; last 0.7%), rising 2.8% yr/yr (expected 3.0%; last 2.8%). May Core CPI was up 0.3% m/m (expected 0.4%; last 0.7%), rising 2.6% yr/yr (expected 2.7%; last 2.5%). May Input PPI was up 0.2% m/m (expected 0.5%; last 2.6%) and Output PPI was up 0.5% m/m, as expected (last 1.5%). May House Price Index was up 3.8% yr/yr (expected 2.8%; last 0.0%).
• Commodities:
  • WTI Crude: +0.8% to $76.67/bbl
  • Gold: -0.2% to $4346.50/ozt
  • Copper: +0.1% to $6.509/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1587
  • GBP/USD: -0.2% to 1.3403
  • USD/CNH: +0.1% to 6.7608
  • USD/JPY: -0.1% to 160.31
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -3.8%; prior 10.8%)
  • 8:30 ET: May Retail Sales (Briefing.com consensus 0.5%; prior 0.5%) and Retail Sales ex-auto (Briefing.com consensus 0.5%; prior 0.7%)
  • 10:00 ET: April Business Inventories (prior 1.5%) and May Pending Home Sales (Briefing.com consensus 0.9%; prior 1.4%)
  • 10:30 ET: Weekly crude oil inventories (prior -7.23 mln)
  • 14:00 ET: June FOMC Rate Decision (Briefing.com consensus 3.50-3.75%; prior 3.50-3.75%)