Bond Market Update

Pressured by Rising Oil

• U.S. Treasuries began the week with losses across the curve, sending yields on 5s and shorter tenors to fresh closing highs for the year while yields on 10s and 30s approached their highs from May. The trading day started in quiet fashion, but the market kept a close eye on the rising price of oil, which caused Treasuries to spend the day in a steady extension of their starting losses. The market tried to bounce during the first hour of action, but the failed bounce gave way to a slow slide that continued into the afternoon. Investors did not receive any data, resulting in continued focus on Iran-related headlines. Iran's weekend claim that the Strait of Hormuz is being blocked was countered by the U.S. military and President Trump said today that the U.S. will control the flow of traffic through the Strait and charge tolls. Today's selling sent yields on the 5-yr note and shorter tenors to their highest settlement levels since late February amid solidifying rate hike expectations while yields on 10s and 30s are now within ten basis points of their respective May highs. Crude oil climbed past its 200-day moving average (74.35) to a three-week high while the U.S. Dollar Index rose 0.3% to 101.25.
• Yield Check:
  • 2-yr: +5 bps to 4.26%
  • 3-yr: +6 bps to 4.30%
  • 5-yr: +6 bps to 4.36%
  • 10-yr: +4 bps to 4.61%
  • 30-yr: +3 bps to 5.10%

• News:
  • President Trump will address the nation on Thursday at 21:00 ET.
  • Fed Governor Waller (FOMC voter) said that he is open to changing the Fed's dot plot and that he would want to see the forecast limited to 18 months.
  • Citigroup upgraded Japan to Overweight from Underweight.
  • China imposed temporary export restrictions on helium due to renewed fighting in the Middle East.
  • South Korea's exports were up 54% yr/yr through the first ten days of June with chip exports jumping nearly 200%.
  • The U.K.'s leadership race will take shape this week with Andy Burnham still seen as the clear favorite to become next prime minister. Reports suggest that he may combine a departmental spending review with an autumn budget.
  • India's June trade deficit reached $30.43 bln (last deficit of $28.21 bln). June CPI was up 4.38% yr/yr (expected 4.30%; last 3.93%).
  • New Zealand's June Performance of Services Index hit 50.6 (last 48.0).
• Today's Data:
  • The Treasury Department reported a $120.3 billion deficit for June versus a surplus of $27.0 billion for the same period in June 2025. Receipts totaled $495.8 billion, while outlays reached $616.1 billion.
    • The key takeaway from the report is the recognition that tariff refunds are cutting into government receipts at the same time the amount spent on net interest is going up. The results is a 12-month budget deficit that exceeds the 12-month deficit registered in May.
• Commodities:
  • WTI crude: +9.4% to $78.42/bbl
  • Gold: -2.6% to $4006.30/ozt
  • Copper: UNCH at $6.28/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1386
  • GBP/USD: -0.3% to 1.3359
  • USD/CNH: UNCH at 6.7847
  • USD/JPY: +0.5% to 162.36
• The Day Ahead:
  • 6:00 ET: June NFIB Small Business Optimism Index (Briefing.com consensus 95.6; prior 95.3)
  • 8:30 ET: June CPI (Briefing.com consensus -0.1%; prior 0.5%) and Core CPI (Briefing.com consensus 0.2%; prior 0.2%)
  • 16:00 ET: May Net Long-Term TIC Flows (prior $103.1 bln)