Bond Market Update

 Inching Lower

• U.S. Treasuries are on track for a slightly lower start after facing some light pressure in the overnight futures market. Treasury futures navigated a narrow sideways range with a slight downward bias through the night while chip-related names had a strong showing in Asia after upbeat quarterly results and guidance from Micron (MU). Unlike Treasuries, other sovereign debt climbed overnight. This included Japan's JGBs despite a weak 20-yr JGB auction. In the U.S., JPMorgan (JPM) and Morgan Stanley (MS) are expected to announce buybacks after the Federal Reserve announced that all 32 banks passed its latest stress test. Crude oil has remained pressured, falling below $70/bbl, while the U.S. Dollar Index is up 0.1% at 101.71.
• Yield Check:
  • 2-yr: +2 bps to 4.16%
  • 3-yr: +2 bps to 4.16%
  • 5-yr: +2 bps to 4.20%
  • 10-yr: +2 bps to 4.42%
  • 30-yr: UNCH at 4.86%

• News:
  • Bank of Japan policymaker Tamura said that the central bank needs to keep hiking rates every few months until reaching the neutral rate of about 2%.
  • Japan's Prime Minister Takaichi said that her government is forming a plan for Japan to become an asset management nation.
  • Thailand's central bank left its policy rate at 1.00%.
  • European Central Bank policymaker Schnabel said that there has been an improvement in the short-term situation, but more rate hikes are needed.
  • Germany is planning to sell $138 bln of debt in Q3.
  • Japan's April Leading Index rose to 116.1 from 114.0 (expected 115.9) and Coincident Indicator was up 1.3% m/m (expected 1.1%; last 0.2%).
  • Australia's May Employment increased by 40,300 (expected 31,200; last -40,700) and full employment increased by 5,200 (last -21,700). May Unemployment Rate fell to 4.4% from 4.5%, as expected, and May Participation Rate rose to 66.7% from 66.6%, as expected.
  • Hong Kong's May trade deficit reached HKD44.2 bln (last deficit of HKD29.5 bln) as imports grew 42.0% m/m (last 44.4%) and exports rose 40.8% m/m (last 42.9%).
  • Germany's July GfK Consumer Climate rose to -29.2 from -29.7 (expected -27.8).
  • U.K.'s June CBI Distributive Trades Survey fell to -54 from -46 (expected -41).
  • France's June Consumer Confidence rose to 84 from 82 (expected 83).
  • Italy's April Industrial Sales increased 0.3% m/m (last 1.8%), growing 3.2% yr/yr (last 4.2%).
  • Spain's Q1 GDP was up 0.6% qtr/qtr, as expected (last 0.8%), expanding 2.7% yr/yr, as expected (last 2.7%). May PPI was up 10.5% yr/yr (last 8.3%).
• Commodities:
  • WTI Crude: -0.8% to $69.76/bbl
  • Gold: -0.2% to $4001.20/ozt
  • Copper: +1.4% to $6.03/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1335
  • GBP/USD: -0.1% to 1.3154
  • USD/CNH: -0.1% to 6.8059
  • USD/JPY: +0.1% to 161.90
• Data out Today:
  • 8:30 ET: 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)
  • 10:30 ET: Weekly natural gas inventories (prior +73 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results