Bond Market Update

Short End Leads

• U.S. Treasuries are on track for a mostly higher start after a quiet night. Treasury futures faced some brief pressure in early evening action, but a steady climb began taking shape around the start of the Asian session, with futures reaching highs not long ago. The advance took place alongside some pressure on the price of oil after President Trump offered continued reassurances that a final deal with Iran could be announced very soon. There has also been some improvement in equity sentiment after an overnight rebound in South Korea's Kospi (+8.2%), which is seen as a proxy for the AI trade. Economic data released overnight included solid May trade figures from China and the market learned about a surprise rate hike in Indonesia. More notably, the market remains confident that the European Central Bank will announce a 25-basis point rate hike of its own on Thursday. The U.S. Treasury will sell $58 bln in 3-yr notes this afternoon. Crude oil is back below $90/bbl while the U.S. Dollar Index is down 0.3% at 99.74.
• Yield Check:
  • 2-yr: -3 bps to 4.13%
  • 3-yr: -2 bps to 4.19%
  • 5-yr: -1 bp to 4.27%
  • 10-yr: UNCH at 4.55%
  • 30-yr: +1 bp to 5.03%

• News:
  • Bank Indonesia unexpectedly raised its policy rate by 25 basis points to 5.50%.
  • China's government has pushed for increased local bond issuance this month, according to China Securities Journal.
  • The Confederation of British Industry lowered its domestic growth forecast for 2026 to 1.1% from 1.3% while the outlook for 2027 was reduced to 0.9% from 1.5%.
  • China's May trade surplus reached $105.43 bln (expected $92.10 bln; last $84.80 bln) as imports grew 27.4% yr/yr (expected 25.0%; last 25.3%) and exports jumped 19.4% yr/yr (expected 15.0%; last 14.1%).
  • Japan's May Machine Tool Orders were up 37.4% yr/yr (last 45.1%).
  • South Korea's Q1 GDP expanded 1.7% qtr/qtr, as expected (last -0.1%), growing 3.6% yr/yr, as expected (last 1.6%).
  • Australia's June Westpac Consumer Sentiment was down 2.9% (last 3.5%). May NAB Business Confidence rose to -14 from -23 and Business Survey remained at 3. 
  • New Zealand's Q1 Manufacturing Sales Volume was up 3.6% qtr/qtr (last -0.5%).
  • Germany's April trade surplus reached EUR14.5 bln (expected surplus of EUR15.4 bln; last surplus of EUR14.7 bln) as imports grew 1.2% m/m (last 4.5%) and exports rose 0.9% m/m (last 0.3%). April Industrial Production was up 0.4% m/m, as expected (last -0.1%) but down 0.5% yr/yr (last -3.5%).
• Commodities:
  • WTI Crude: -1.9% to $89.60/bbl
  • Gold: UNCH at $4364.00/ozt
  • Copper: +1.2% to $6.429/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1572
  • GBP/USD: +0.5% to 1.3402
  • USD/CNH: -0.1% to 6.7722
  • USD/JPY: UNCH at 160.15
• Data out Today:
  • 6:00 ET: May NFIB Small Business Optimism (actual 95.3; prior 95.9)
  • 8:30 ET: April Trade Balance (Briefing.com consensus -$55.5 bln; prior -$60.3 bln)
  • 10:00 ET: April Wholesale Inventories (Briefing.com consensus 0.5%; prior 1.3%) and May Existing Home Sales (Briefing.com consensus 0.6%; prior 0.2%)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results