Bond Market Update

Pressure Persists

• U.S. Treasuries are on track for a lower start, looking to continue this week's retreat that has already driven yields on most tenors to fresh highs for the year. Treasury futures spent the early part of the night in a sideways range, slipping to lows once the focus turned to action in Europe after a quiet session in Asia. Global technology stocks have remained volatile with Asian names showing some strength that has not carried over to U.S. equity futures. Economic data released overnight included a strong jobs report from Australia, though the market still does not expect the Reserve Bank of Australia to announce a hike at its next meeting. In Europe, the European Central Bank is about to release its July directive, which is also not expected to call for a rate hike, though the stage could be set for an increase in September. Crude oil has climbed past $90/bbl while the U.S. Dollar Index is up 0.2% at 101.29.
• Yield Check:
  • 2-yr: +3 bps to 4.33%
  • 3-yr: +3 bps to 4.37%
  • 5-yr: +3 bps to 4.44%
  • 10-yr: +3 bps to 4.69%
  • 30-yr: +3 bps to 5.18%

• News:
  • There was some speculation that the Bank of Japan could accelerate the pace of its rate hikes to counter inflation risks.
  • The FCC voted to prohibit sales of devices in the U.S. that include hardware from certain Chinese companies.
  • China's June FDI was down 5.0% YTD (last -8.6%).
  • South Korea's flash Q2 GDP expanded 0.6% qtr/qtr (expected 0.4%; last 1.8%), growing 3.7% yr/yr (expected 3.5%; last 3.8%).
  • Australia's June Employment increased by 76,300 (expected 16,400; last 44,000) and full employment increased by 29,300 (last 7,200). June Unemployment Rate remained at 4.4%, as expected, and Participation Rate rose to 67.0% from 66.7% (expected 66.7%).
  • Singapore's June CPI was unchanged m/m (last 0.7%), rising 1.9% yr/yr (expected 2.0%; last 1.8%). June Core CPI was up 1.6% yr/yr, as expected (last 1.4%).
• Commodities:
  • WTI Crude: +4.2% to $90.44/bbl
  • Gold: -1.6% to $4085.40/ozt
  • Copper: -0.6% to $6.456/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1393
  • GBP/USD: -0.1% to 1.3353
  • USD/CNH: UNCH at 6.7721 
  • USD/JPY: +0.3% to 163.49
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 214,000; prior 208,000) and Continuing Claims (prior 1.805 mln)
  • 10:30 ET: Weekly natural gas inventories (prior +41 bcf)