Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a slightly lower start after retreating through the first two sessions of the week. The early dip start is set to follow a night of sideways trade in the futures market that kept the 10-yr yield inside a two-basis point range. Overnight movement in other sovereign debt was also limited with a mild downside bias. Investors received only a small dose of news since yesterday afternoon, and the economic data flow was on the light side. The U.K.'s inflation report for June was close to expectations ahead of next week's Bank of England decision, which is expected to be a hold. Once again, the U.S. session will be free of top-tier data, but the U.S. Treasury will hold a $13 bln 20-yr bond reopening this afternoon. Crude oil has climbed above $87/bbl while the U.S. Dollar Index is flat at 101.16.
• Yield Check:
  • 2-yr: +1 bp to 4.27%
  • 3-yr: +1 bp to 4.31%
  • 5-yr: +1 bp to 4.38%
  • 10-yr: +1 bp to 4.64%
  • 30-yr: +1 bp to 5.14%

• News:
  • Bank Indonesia left its policy rate at 5.75% against some expectations for a hike.
  • Japan is reportedly looking to relax lending rules for banks while also encouraging pension funds to invest in alternative assets.
  • Secretary of State Rubio met with China's Foreign Minister Yi in Manila.
  • British Prime Minister Burnham will seek to reduce taxes for hospitality businesses while also calling for fiscal restraint.
  • The French parliament banned the use of social media for children under 15.
  • Japan's June trade deficit reached JPY880 bln (expected deficit of JPY560 bln; last deficit of JPY220 bln) as imports grew 25.4% yr/yr (expected 21.0%; last 12.5%) and exports rose 19.3% yr/yr (expected 18.6%; last 16.8%).
  • South Korea's June PPI was unchanged m/m (last 1.0%), rising 8.6% yr/yr (last 8.6%).
  • Australia's June MI Leading Index was unchanged m/m (last -0.1%).
  • New Zealand's June Credit Card Spending was up 3.1% yr/yr (last 4.2%). 
  • U.K.'s June CPI was up 0.1% m/m, as expected (last 0.2%), growing 2.6% yr/yr (expected 2.7%; last 2.8%). June Core CPI was up 0.3% m/m (last 0.3%), rising 2.6% yr/yr (expected 2.5%; last 2.6%). June Input PPI was down 2.0% m/m (expected -2.7%; last 0.6%) and Output PPI was unchanged m/m (expected -0.1%; last 0.3%). June House Price Index was up 2.7% (expected 3.2%; last 3.8%).
• Commodities:
  • WTI Crude: +3.4% to $87.24/bbl
  • Gold: +1.2% to $4123.90/ozt
  • Copper: -0.6% to $6.515/lb
• Currencies:
  • EUR/USD: UNCH at 1.1405
  • GBP/USD: UNCH at 1.3369
  • USD/CNH: +0.1% to 6.7743
  • USD/JPY: -0.1% to 163.04
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 1.9%; 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