Bond Market Update

Long End Lags Ahead of Warsh

• U.S. Treasuries are on track for a lower start with longer tenors set to pace the early selling. Treasury futures continued sliding after yesterday's cash close, remaining near their overnight lows into early morning trade. The lower start precedes Fed Chairman Warsh's appearance at the European Central Bank's policy forum in Portugal alongside European Central Bank President Lagarde later this morning. Overnight action featured the release of a big batch of data, which included a strong Tankan survey from Japan and an above-consensus final June Manufacturing PMI for the eurozone (51.4; expected 51.3) thanks to upside surprises from France and Germany. The U.S. session will also include the release of final June S&P Global U.S. Manufacturing PMI (prior 55.7) at 9:45 ET, followed by June ISM Manufacturing Index (Briefing.com consensus 53.8%; prior 54.0%) at 10:00 ET. Crude oil hovers near $69/bbl while the U.S. Dollar Index is up 0.2% at 101.40.
• Yield Check:
  • 2-yr: +4 bps to 4.18%
  • 3-yr: +5 bps to 4.19%
  • 5-yr: +5 bps to 4.24%
  • 10-yr: +7 bps to 4.49%
  • 30-yr: +8 bps to 4.98%

• News:
  • Japan's Economy Minister Kiuchi said that he hopes that the Bank of Japan works closely with the government to achieve its target amid recent speculation that the Japanese government is pressuring the BoJ to slow the pace of tightening.
  • World Bank will reportedly stop lending to China by 2031.
  • The European Central Bank could double minimum reserve requirements for banks to 2% later this year.
  • China's June RatingDog Manufacturing PMI hit 51.7 (expected 51.9; last 51.8).
  • Japan's June Manufacturing PMI hit 54.8 (expected 54.9; last 54.5). Q2 All Big Industry CAPEX was up 11.5% (last 3.3%) and All Small Industry CAPEX was down 8.3% (last -8.1%). Q2 Tankan Large Manufacturers Index rose to 22 from 17 (expected 16) and Large Non-Manufacturers Index rose to 17 from 14 (expected 13). June Household Confidence rose to 33.8 from 33.6 (expected 34.1).
  • South Korea's June Manufacturing PMI hit 52.1 (last 54.8). June trade surplus reached $36.15 bln (last surplus of $27.04 bln) as imports grew 30.1% yr/yr (last 20.7%) and exports grew 70.9% yr/yr (last 53.4%).
  • Australia's June Manufacturing PMI hit 51.5 (expected 51.2; last 50.7). June AIG Construction Index fell to -38.1 from -11.2 and AIG Manufacturing Index rose to -16.8 from -21.3. May Building Approvals were down 1.1% m/m (expected 0.5%; last -0.2%) but up 5.3% yr/yr (last 10.9%). May Private House Approvals rose 2.8% m/m (last -1.0%). June Commodity Prices were up 16.9% yr/yr (last 16.8%).
  • India's June Manufacturing PMI hit 54.2 (expected 54.5; last 55.0).
  • Singapore's May Bank Lending reached SGD917.7 bln (last SGD908.4 bln).
  • Eurozone's flash June CPI was down 0.1% m/m (last 0.1%) but up 2.8% yr/yr (expected 3.0%; last 3.2%). Flash June Core CPI was up 0.2% m/m (last 0.3%), rising 2.4% yr/yr (expected 2.5%; last 2.6%). June Manufacturing PMI hit 51.4 (expected 51.3; last 51.6)
  • Germany's June Manufacturing PMI hit 50.3 (expected 50.0; last 50.1).
  • U.K.'s June Nationwide HPI was unchanged m/m (expected 0.1%; last -0.6%), rising 2.2% yr/yr (expected 2.4%; last 1.7%). June Manufacturing PMI hit 52.5 (expected 53.1; last 53.9)
  • France's June Manufacturing PMI hit 51.2 (expected 50.7; last 49.7).
  • Italy's June Manufacturing PMI hit 52.2 (expected 52.4; last 52.9). Q1 Public Deficit was up 7.8% (last -1.4%).
  • Spain's June Manufacturing PMI hit 49.7 (expected 51.0; last 51.2).
  • Swiss May Retail Sales rose 3.5% yr/yr (expected 1.8%; last 1.7%). June Manufacturing PMI hit 54.3 (expected 56.4; last 57.3).
• Commodities:
  • WTI Crude: -0.6% to $69.10/bbl
  • Gold: +0.2% to $4044.60/ozt
  • Copper: -1.6% to $6.152/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1385
  • GBP/USD: -0.1% to 1.3240
  • USD/CNH: +0.2% to 6.7997
  • USD/JPY: +0.1% to 162.70
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 0.0%; prior 1.0%)
  • 8:15 ET: June ADP Employment Change (Briefing.com consensus 112,000; prior 122,000)
  • 9:45 ET: Final June S&P Global U.S. Manufacturing PMI (prior 55.7)
  • 10:00 ET: May Construction Spending (Briefing.com consensus 0.5%; prior 0.4%) and June ISM Manufacturing Index (Briefing.com consensus 53.8%; prior 54.0%)
  • 10:30 ET: Weekly crude oil inventories (prior -6.09 mln)