Bond Market Update

Eye on Oil and PPI

• U.S. Treasuries had a mostly weaker overnight trade that has pushed up yields across the curve. Increased hostilities between the U.S. and Iran, and the bump in oil prices, have contributed to the selling interest that is also present in other sovereign bond markets. Yesterday, the June CPI report effectively turned the tide for the Treasury market, so there will be another shot at doing the same when the June PPI report is released at 8:30 a.m. ET. Fed Chair Warsh, who reiterated the Fed's commitment to delivering price stability in front of the House Financial Services Committee yesterday, is back on Capital Hill before the Senate Banking Committee at 10:00 a.m. ET for day two of his semi-annual monetary policy testimony. Separately, China released a large batch of data that featured stronger-than-expected retail sales and industrial production for June, better-than-expected Q2 GDP on a year-over-year basis, and weaker-than-expected new loan activity for June.
• Yield Check:
  • 2-yr: +2 bps to 4.21%
  • 3-yr: +2 bps to 4.26%
  • 5-yr: +2 bps to 4.34%
  • 10-yr: +2 bps to 4.61%
  • 30-yr: +3 bps to 5.12%

• News:
  • President Trump held a White House Situation Room meeting to discuss a massive offensive in Iran that will be wider in scope than the previous strikes this week. In a separate interview, President Trump threatened to strike Iranian power plants next week unless they return to the negotiating table. Axios
  • Iran threatens to block more energy shipping routes as it continues to attack Gulf area nations. Reuters
  • The House committee could vote on a reconciliation resolution Thursday, which includes $67 bln for defense, $20 billion in farm aid, and various voting reforms. Politico
  • House passes daylight savings legislation, according to NBC News
  • South Korean President Lee remarked that the South Korean stock market is "quite unstable."
  • China's June Retail Sales 1.0% yr/yr (-0.1% expected; prior -0.6%); June Industrial Production 5.3% yr/yr (4.7% expected; prior 4.5%); June Fixed Asset Investment -5.7% yr/yr (-5.0% expected; prior -4.1%); Q2 GDP 0.9% qtr/qtr (0.9% expected; prior 1.3%) and 4.7% year-to-date (4.5% expected; prior 5.0%); June House Prices -3.3% yr/yr (prior -3.5%); June Unemployment Rate 5.0% (5.1% expected; prior 5.1%); June New Loans CNY1610.0 bln (CNY1950.0 bln expected; prior CNY520.0 bln)
• Commodities:
  • WTI crude: +0.6% to $79.84/bbl
  • Gold: -0.8% to $4036.40/ozt
  • Copper: -0.3% to $6.36/lb
• Currencies:
  • EUR/USD: flat at 1.1418
  • GBP/USD: +0.1% to 1.3402
  • USD/CNH: flat at 6.7755
  • USD/JPY: +0.1% to 162.36
• The Day Ahead:
  • 08:30 ET: June PPI (Briefing.com consensus 0.1%; prior 1.1%), June Core PPI (Briefing.com consensus 0.4%; prior 0.4%)
  • 08:30 ET: July Empire State Manufacturing survey (Briefing.com consensus 8.5; prior 5.7)
  • 10:30 ET: Weekly crude oil inventories (prior +3.00 mln)
  • 14:00 ET: July Fed Beige Book