Bond Market Update

Steady Start Ahead Despite Ongoing Geopolitical Worries

• U.S. Treasuries are on track for a slightly higher start to follow a night that saw renewed concerns related to the Middle East. Iran struck some targets in Israel, sparking a rally in WTI crude, which climbed back toward $95/bbl, but it has given back the bulk of its overnight gain after President Trump took to social media this morning, assuring that despite the skirmish, Israel and Iran are still looking for a lasting ceasefire. The overnight data flow included the release of Japan's updated Q1 GDP estimate (0.5% qtr/qtr), which was left unrevised, while Germany saw a sharper-than-expected drop in April Factory Orders (-3.8%; expected -2.2%), which has not stopped the market from thinking that the European Central Bank will announce a 25-basis point rate hike on Thursday. The U.S. session will not include any data today but there are some noteworthy reports on this week's schedule, including Wednesday's release of May CPI (Briefing.com consensus 0.5%; prior 0.6%) and Core CPI (Briefing.com consensus 0.3%; prior 0.4%). Crude oil hovers just south of $92/bbl while the U.S. Dollar Index is down 0.1% at 99.95.
• Yield Check:
  • 2-yr: -1 bp to 4.15%
  • 3-yr: -1 bp to 4.20%
  • 5-yr: -1 bp to 4.27%
  • 10-yr: UNCH at 4.54%
  • 30-yr: UNCH at 5.00%

• News:
  • China's President Xi made a State visit to North Korea.
  • Italy's Intesa Sanpaolo offered EUR30.6 bln to purchase Monte dei Pachi di Siena, looking to form the second-largest lender in the eurozone.
  • Japan's Q1 GDP expanded 0.5% qtr/qtr, as expected (last 0.3%) and Q1 GDP Annualized was up 1.8% qtr/qtr (expected 2.1%; last 0.7%). Q1 GDP Price Index was up 3.2% yr/yr (expected 3.4%; last 3.4%), Q1 GDP Capital Expenditure was down 0.7% qtr/qtr (expected 0.3%; last 0.1%), Q1 GDP Private Consumption was up 0.3% qtr/qtr, as expected (last 0.1%), and Q1 GDP External Demand was up 0.3% qtr/qtr, as expected (last 0.0%). April Current Account surplus reached JPY4.21 trln (expected JPY3.26 trln; last JPY3.90 trln), May Bank Lending was up 5.7% yr/yr (expected 5.6%; last 5.4%), and May Economy Watchers Current Index hit 43.6 (expected 41.9; last 40.8).
  • Eurozone's June Sentix Investor Confidence rose to -13.4 from -16.4 (expected -13.8).
  • Germany's April Factory Orders were down 3.8% m/m (expected -2.2%; last 4.5%).
• Commodities:
  • WTI Crude: +1.1% to $91.50/bbl
  • Gold: -0.4% to $4347.50/ozt
  • Copper: +1.3% to $6.366/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1537
  • GBP/USD: +0.2% to 1.3360
  • USD/CNH: -0.1% to 6.7829
  • USD/JPY: -0.2% to 159.97
• No Data on Today's Schedule