Bond Market Update

Supportive Tone

• U.S. Treasuries have a positive disposition, supported by sliding oil prices that have followed reports (yet again) of a potential agreement between the U.S. and Iran to extend the ceasefire and to get the Strait of Hormuz open over the next week. Notably, stocks are not rallying on this familiar-sounding possibility nor on the sight of lower oil prices. There is some chatter about rally exhaustion that is likely feeding some capital preservation trades that are also benefitting Treasuries this morning in front of the April JOLTS - Job Openings report for April at 10:00 a.m. ET. The U.S. Dollar Index is down 0.1% to 99.09.
• Yield Check:
  • 2-yr: -3 bps to 4.02%
  • 3-yr: -4 bps to 4.06%
  • 5-yr: -5 bps to 4.14%
  • 10-yr: -5 bps to 4.43%
  • 30-yr: -4 bps to 4.95%

• News:
  • President Trump says he spoke with Israeli Prime Minister Benjamin Netanyahu and told him to stop the shooting in Lebanon. Mr. Trump thinks he will have an agreement with Iran to extend the ceasefire and reopen the Strait of Hormuz "over the next week."
  • White House adjusts the tariffs on agricultural equipment, like combines and harvesters, as well as certain other equipment, from 25% to 15%; also adjusts certain metals tariffs.
  • USTR proposes additional 25% tariff on imports from Brazil, excluding goods subject to Section 232 tariffs
  • There are reports that the European Commission is discussing plans to allow countries more fiscal flexibility as they deal with attempts to mitigate the impact of higher energy costs.
  • CMS launches nationwide framework to implement Medicaid work requirements.
  • Chatter about a possible rate hike by the Bank of Korea was ignited by a hotter-than-expected CPI report for May that featured the highest annualized rate (3.1%) since early 2024.
  • The Bank of Korea is expecting the inflation rate to maintain a 3-handle for some time.
  • The PBOC's open market operations included a fund injection of just CNY200 mln, which was the smallest OMO since 2015.
  • Eurozone's May CPI 0.1% m/m (last 1.0%) and 3.2% yr/yr (expected 3.2%; last 3.0%); May core CPI 0.3% m/m (last 0.9%) and 2.5% yr/yr (expected 2.4%; last 2.2%)
• Commodities: 
  • WTI crude: -1.2% to $91.07/bbl
  • Gold: +1.2% to $4559.00/ozt
  • Copper: +1.2% to $6.63/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1648
  • GBP/USD: +0.1% to 1.3469
  • USD/CNH: -0.1% to 6.7610
  • USD/JPY: +0.1% to 159.73
• The Day Ahead:
  • 10:00 ET: April Job Openings (prior 6.866 mln)