Bond Market Update

2-Yr Yield Settles At 16-Month High

• U.S. Treasuries began the week with losses across the curve after a lower start was followed by continued selling as the day went on. Treasuries recorded more than half of their losses at the open after the three-day holiday weekend featured some Friday selling in the futures market. Treasury futures staged a brief bounce on Sunday night, but they returned to levels from Friday in time for today's cash open. The trading week started with some renewed questions about the delicate U.S.-Iran peace deal after Iran announced that it is blocking the Strait of Hormuz again due to continued fighting in Lebanon. However, U.S. officials were quick to dispute the claims. The conflicting narrative persisted as the day went on, with Vice President Vance saying that Iran has agreed to nuclear inspections, while Iranian media claimed that no new agreements have been made. Treasuries attempted to rise from their starting levels during the first few minutes of action, but they quickly found resistance, spending the rest of the session in a slow retreat that increased yields on most tenors by two basis points from their starting levels with the 2-yr yield ending at a level not seen since early 2025. Crude oil made a morning run toward $79/bbl before falling to its lowest pit close since early March while the U.S. Dollar Index rose 0.2% to 101.01.
• Yield Check:
  • 2-yr: +5 bps to 4.23%
  • 3-yr: +6 bps to 4.25%
  • 5-yr: +6 bps to 4.29%
  • 10-yr: +6 bps to 4.51%
  • 30-yr: +5 bps to 4.95%

• News:
  • Goldman Sachs lowered its Q2 growth forecast for China to 3.5% from 4.0%.
  • The People's Bank of China left its one-year and five-year loan prime rates at their respective 3.50% and 5.00%.
  • China's second-largest shopping festival of the year, which took place on Friday, saw soft demand.
  • Former Fed Chairman Greenspan died today at the age of 100.
  • Japan plans to invest JPY10.5 trln in AI-related projects by 2040, according to Nikkei.
  • The market is growing more confident that the Bank of Japan's next rate hike will take place no later than October.
  • Greater Manchester Mayor Andy Burnham is expected to run to become the leader of the U.K.'s Labour party, which would make him prime minister.
  • China's May FDI was down 8.6% YTD (last -10.3%).
  • New Zealand's May Credit Card Spending was up 5.1% yr/yr (last 3.1%).
  • India's May Infrastructure Output was up 0.5% yr/yr (last 1.7%).
  • Switzerland's May M3 Money Supply reached CHF1.23 trln (last CHF1.23 trln).
• Commodities:
  • WTI crude: -1.8% to $75.19/bbl
  • Gold: -1.0% to $4202.60/ozt
  • Copper: -0.3% to $6.37/lb
• Currencies:
  • EUR/USD: -0.4% to 1.1423
  • GBP/USD: +0.1% to 1.3243
  • USD/CNH: UNCH at 6.7781
  • USD/JPY: +0.1% to 161.47
• The Day Ahead:
  • 9:45 ET: 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)
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results