Bond Market Update

Monday Losses Extended

• U.S. Treasuries saw an extension of their defensive start to the week, lifting the 5-yr yield to a fresh high for the year while yields on other tenors crept closer to 2026 highs of their own. The cash session started in quiet fashion after a night that featured renewed strength in technology stocks in Asia, which carried into the U.S. session. The flat start was followed by some immediate pressure on the 2-yr note, which eventually also prompted a slide to fresh lows in other tenors. The 2-yr note continued setting fresh lows into the afternoon, sending its yield to within just four basis points of last week's high, while the 5-yr yield overtook last week's high, rising to its highest level since February 2025. Longer tenors resisted a bit, staying just above their late-morning lows, but their yields are also approaching year-to-date highs, which is being watched closely. In particular, the 30-yr bond would be left with little immediate technical support in the event of accelerated selling that drives the 30-yr yield past the 5.200% mark. Crude oil approached $85/bbl, pausing near its 50-day moving average (85.06) while the U.S. Dollar Index rose 0.2% to 101.19.
• Yield Check:
  • 2-yr: +5 bps to 4.26%
  • 3-yr: +5 bps to 4.30%
  • 5-yr: +4 bps to 4.37%
  • 10-yr: +3 bps to 4.63%
  • 30-yr: +1 bp to 5.13%

• News:
  • Treasury Secretary Bessent said that the Clarity Act, which will establish a federal regulatory framework for cryptocurrencies, is on the verge of being passed.
  • President Trump announced that Canada would face an additional 50% tariff on $20 bln worth of exports to the U.S.
  • Japan's cabinet approved the new general economic framework, which prioritizes fiscal sustainability.
  • China's National Development and Reform Commission called for stronger development of the private economy and the services sector.
  • The latest bank lending survey from the European Central Bank showed tighter access to credit in Q2 due to geopolitical instability with additional tightening expected in Q3.
  • Hong Kong's June CPI was unchanged m/m (last 0.0%), rising 2.0% yr/yr (last 2.0%). 
  • New Zealand's Q2 CPI was up 1.5% qtr/qtr (expected 1.4%; last 0.9%), rising 4.1% yr/yr (expected 4.0%: last 3.1%).
  • Eurozone's July ZEW Economic Sentiment rose to 23.4 from 9.5 (expected 11.2).
  • Germany's July ZEW Economic Sentiment rose to 26.3 from 10.5 (expected 15.1) and ZEW Current Conditions rose to -77.6 from -81.0 (expected -77.8).
  • U.K.'s May three-month employment increased by 147,000 (expected 85,000; last 100,000), May Claimant Count increased by 6,700 (expected 29,400; last 1,300). May Average Earnings Index + Bonus was up 4.3% yr/yr (expected 4.5%; last 4.4%). May Unemployment Rate remained at 4.9%, as expected.
  • Spain's May trade deficit reached EUR8.24 bln (last deficit of EUR5.20 bln).
  • Swiss June trade surplus reached CHF5.224 bln (last surplus of CHF5.989 bln).
• Commodities:
  • WTI crude: +2.9% to $84.99/bbl
  • Gold: +1.5% to $4076.70/ozt 
  • Copper: +3.3% to $6.55/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1402
  • GBP/USD: -0.3% to 1.3380
  • USD/CNH: UNCH at 6.7684
  • USD/JPY: +0.5% to 163.20
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -2.7%)
  • 10:30 ET: Weekly crude oil inventories (prior -1.69 mln)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results