Bond Market Update

Mixed Finish to Mixed Week

• U.S. Treasuries finished the holiday-shortened week in mixed fashion, sending the 30-yr yield to a two-month low while the 2-yr yield settled at its highest level since February 2025. The Thursday session was quiet compared to Wednesday's jam-packed affair that featured news of impending changes to most, if not all, aspects to how the Fed will conduct monetary policy under the leadership of Kevin Warsh. Treasuries appeared on track for a continuation of yesterday's afternoon divergence that saw relative weakness up front and outperformance in the long bond, but the 2-yr note quickly climbed off its opening low while longer tenors dipped from their early highs. As a result, the performance gap shrunk by the end of the day, but the 2-yr note could not avoid a lower finish. The 2-yr note also finished the week in negative territory while longer tenors recorded gains, compressing the 2s10s spread by 13 basis points to 27 bps, amid growing expectations for rates to remain higher for longer. The market maintained some focus on the price of oil, which ended the week only about $10/bbl above levels seen before the start of the U.S. military campaign against Iran. The U.S. Dollar Index rose 0.8% to 100.86, reaching a 13-month high.
• Yield Check:
  • 2-yr: +2 bps to 4.18% (+9 bps this week)
  • 3-yr: +1 bp to 4.19% (+6 bps this week)
  • 5-yr: UNCH at 4.23% (UNCH this week)
  • 10-yr: -1 bp to 4.45% (-6 bps this week)
  • 30-yr: -3 bps to 4.90% (-8 bps this week)

• News:
  • Bank of Japan Deputy Governor Himino will take part in a semiannual monetary policy testimony tomorrow.
  • Australian Securities and Investments Commission warned about the quality of private credit.
  • China launched the third round of its consumer goods trade-in program after a contraction in May Retail Sales.
  • Bangko Sentral ng Pilipinas raised its policy rate by 25 bps to 4.75%.
  • Bank Indonesia raised its policy rate by 25 bps to 5.75%.
  • The Bank of England left its bank rate at 3.75%, as expected.
  • The Swiss National Bank left its policy rate at 0.00%, as expected.
  • Norges Bank left its policy rate at 4.25% but hinted at a rate hike later this year.
  • European Central Bank policymaker Kocher said that inflation will stay higher for some time and that the ECB remains ready to act.
  • New Zealand's Q1 GDP expanded 0.8% qtr/qtr, as expected (last 0.5%), growing 1.5% yr/yr (expected 1.1%; last 1.5%).
  • Eurozone's April Current Account surplus reached EUR15.7 bln (expected surplus of EUR18.5 bln; last surplus of EUR14.9 bln). April Construction Output was up 0.6% m/m (last 1.8%).
  • U.K.'s April three-month employment increased by 100,000 (expected 75,000; last 148,000), April Average Earnings Index + Bonus was up 4.4% yr/yr (expected 4.0%; last 4.4%). April Unemployment Rate fell to 4.9% from 5.0% (expected 5.0%) and May Claimant Count Change reached 31,200 (expected 25,800; last 8,300).
• Today's Data:
  • Initial jobless claims for the week ending June 13 decreased by 4,000 to 226,000 (Briefing.com consensus: 226,000), while continuing jobless claims for the week ending June 6 increased by 24,000 to 1.810 million.
    • The key takeaway from the report is the steady level of initial jobless claims—a leading indicator—which suggests the continuation of low firing activity overall.
  • The Philadelphia Fed Index bounced back into expansion territory, printing a reading of 10.3 (Briefing.com consensus: 10.0) versus -0.4 in the prior month. The line between expansion and contraction for this report is 0.0.
  • Conference Board's Leading Economic Index was up 0.1% in May (Briefing.com consensus 0.1%) after increasing a revised 0.2% (from 0.1%) in April.
  • Weekly natural gas inventories increased by 73 bcf after increasing by 108 bcf a week ago.
• Commodities:
  • WTI crude: +0.7% to $76.59/bbl
  • Gold: -3.1% to $4245.30/ozt
  • Copper: -1.5% to $6.39/lb
• Currencies:
  • EUR/USD: -0.4% to 1.1455
  • GBP/USD: -0.7% to 1.3196
  • USD/CNH: +0.1% to 6.7800
  • USD/JPY: +0.8% to 161.75
• The Week Ahead:
  • Monday: Nothing of note
  • Tuesday: Flash June S&P Global U.S. Manufacturing PMI (prior 55.1) and flash June S&P Global U.S. Services PMI (prior 50.7) at 9:45 ET; and $69 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -3.8%) at 7:00 ET; Q1 Current Account Balance (Briefing.com consensus -$237.5 bln; prior -$190.7 bln) at 10:00 ET; weekly crude oil inventories (prior -8.26 mln) at 10:30 ET; and $70 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: Q1 GDP - third estimate (Briefing.com consensus 1.6%; prior 1.6%), Q1 GDP Deflator - third estimate (Briefing.com consensus 3.5%; prior 3.5%), May Personal Income (Briefing.com consensus 0.3%; prior 0.0%), Personal Spending (Briefing.com consensus 0.3%; prior 0.5%), PCE Prices (Briefing.com consensus 0.4%; prior 0.4%), Core PCE Prices (Briefing.com consensus 0.3%; prior 0.2%), May Durable Orders (Briefing.com consensus -3.2%; prior 7.9%), Durable Orders ex-transport (Briefing.com consensus 0.5%; prior 1.1%), weekly Initial Claims (Briefing.com consensus 225,0000; prior 226,000), and Continuing Claims (prior 1.810) at 8:30 ET; weekly natural gas inventories (prior +73 bcf) at 10:30 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
  • Friday: May advance International Trade in Goods (prior -$82.4 bln), advance Retail Inventories (prior 0.7%), and advance Wholesale Inventories (prior 0.5%) at 8:30 ET; and final June University of Michigan Consumer Sentiment (Briefing.com consensus 48.9; prior 48.9) at 10:00 ET