Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a slightly lower start after another quiet night in the futures market. Treasury futures inched higher through the evening, but the slim gains were given up quickly once the focus turned to action in Europe. Unlike Treasury futures, other sovereign debt has shown some slight strength after a big overnight end-of-month batch of data from Asia and Europe. China's Manufacturing and Non-Manufacturing PMI readings for June reflected slight expansion, which was a touch better than expected while flash June CPI readings from Germany, France, and Italy were cooler than expected, resulting in the deceleration of their respective year-over-year rates. In other news, the Japanese yen has continued weakening against the dollar, trading at its lowest level against the greenback since late 1986. Crude oil remains just above $70/bbl while the U.S. Dollar Index is up 0.3% at 101.36.
• Yield Check:
  • 2-yr: +1 bp to 4.12%
  • 3-yr: +1 bp to 4.12%
  • 5-yr: +2 bps to 4.16%
  • 10-yr: +2 bps to 4.39%
  • 30-yr: +1 bp to 4.87%

• News:
  • China's electric vehicle exports for May were up 48% yr/yr.
  • European Central Bank President Lagarde said that the June rate hike was a deliberate, unanimous, move, while policymaker Wunsch said that another rate hike could be needed quickly.
  • Shipping giant Maersk raised its outlook for the year due to strong demand in the container shipping market.
  • Germany is looking for about EUR400 mln of spending cuts in the EU's EUR2 trln budget.
  • China's June Manufacturing PMI hit 50.3 (expected 50.1; last 50.0) and June Non-Manufacturing PMI hit 50.2 (expected 49.9; last 50.1).
  • Japan's May Industrial Production was up 0.5% m/m (expected 0.6%; last 0.5%), May jobs/applications ratio fell to 1.17 from 1.18 (expected 1.18), and May Unemployment Rate remained at 2.5%, as expected. May Housing Starts were up 33.9% yr/yr (expected 31.8%; last 11.4%) and Construction Orders were down 6.7% yr/yr (last -32.3%).
  • South Korea's May Retail Sales rose 0.1% m/m (last -3.5%), May Industrial Production was down 3.0% m/m (last -0.7%), falling 0.9% yr/yr (last 1.5%). May Service Sector Output was up 1.3% m/m (last -0.9%).
  • Australia's June ANZ Business Confidence rose to 36.6 from 10.0. May Private Sector Credit was up 0.7% m/m (expected 0.6%; last 0.7%) and May Housing Credit was up 0.5% m/m (lats 0.6%).
  • Germany's flash June CPI was down 0.3% m/m (expected 0.0%; last -0.2%), rising 2.3% yr/yr (expected 2.6%; last 2.6%). May Retail Sales were up 1.1% m/m (expected 0.0%; last -0.4%), rising 1.8% yr/yr (expected 0.0%; last -0.6%). May Import Price Index was up 0.7% m/m (expected 0.4%; last 1.2%), rising 6.8% yr/yr (last 5.3%).
  • U.K.'s Q1 GDP was up 0.6% qtr/qtr, as expected (last 0.1%), rising 0.9% yr/yr (expected 1.1%; last 0.9%). Q1 Business Investment was up 0.9% qtr/qtr (expected 0.7%; last -3.0%) but down 1.3% yr/yr (expected -1.8%; last 1.8%). Q1 Current Account deficit reached GBP22.1 bln (expected deficit of GBP22.2 bln; last deficit of GBP27.2 bln).
  • France's flash June CPI was down 0.2% m/m (expected 0.0%; last 0.1%) but up 1.8% yr/yr (expected 2.1%; last 2.4%). May PPI was up 3.0% yr/yr (last 2.3%). May Consumer Spending was up 0.5% m/m (expected 0.2%; last -0.5%).
  • Italy's flash June CPI was unchanged m/m (expected 0.2%; last 0.4%), rising 3.0% yr/yr (expected 3.1%; last 3.2%). May PPI was down 0.2% m/m (last 0.3%) but up 7.3% yr/yr (last 6.8%).
  • Spain's April Current Account surplus reached EUR1.88 bln (last surplus of EUR4.61 bln).
  • Swiss June KOF Leading Indicators rose to 101.2 from 98.6 (expected 99.0).
• Commodities:
  • WTI Crude: +0.2% to $70.92/bbl
  • Gold: +0.3% to $4050.60/ozt
  • Copper: +1.6% to $6.26/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1393
  • GBP/USD: -0.2% to 1.3224
  • USD/CNH: -0.1% to 6.7915
  • USD/JPY: +0.3% to 162.42
• Data out Today:
  • 9:00 ET: April FHFA Housing Price Index (Briefing.com consensus 0.2%; prior 0.1%) and April S&P Case-Shiller Home Price Index (Briefing.com consensus 0.9%; prior 0.8%)
  • 9:45 ET: June Chicago PMI (Briefing.com consensus 60.0; prior 62.7)
  • 10:00 ET: June Consumer Confidence (Briefing.com consensus 94.2; prior 93.1)