Bond Market Update

Slide Extended

• U.S. Treasuries continued this week's retreat, sending yields on the 10-yr note and shorter tenors to their highest levels since early 2025 while the 30-yr yield stopped just shy of its highest level since late 2007. Today's retreat was essentially a repeat of this week's story as the rising price of oil kept Treasuries under pressure due to the inflationary implications. WTI crude added more than $5/bbl, jumping past $92/bbl while Brent crude made headlines, rising back above $100/bbl. Concerns about ongoing fighting between U.S. and Iran kept offering support to oil with President Trump threatening to intensify the military campaign. Today's selling was largely done at the open with 10s and shorter tenors remaining near their morning lows into the close while the long bond recovered some of its opening loss, keeping its yield just below the 2026 high. Rate hike expectations have continued their upward drift with the market growing more confident that a 25-basis point increase will be announced in September. Crude oil settled at a six-week high while the U.S. Dollar Index rose 0.3% to 101.46.
• Yield Check:
  • 2-yr: +6 bps to 4.36%
  • 3-yr: +5 bps to 4.39%
  • 5-yr: +5 bps to 4.46%
  • 10-yr: +5 bps to 4.70%
  • 30-yr: +2 bps to 5.17%

• 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%).
• Today's Data:
  • Initial jobless claims for the week ending July 18 decreased by 22,000 to 187,000 (Briefing.com consensus: 214,000), which is the lowest level since September 1969. Continuing jobless claims for the week ending July 11 were down 2,000 to 1.796 million.
    • The key takeaway from the report is that the low level of initial claims is a signpost of a labor market that continues to see low firing activity, which is a good sign for continued increases in consumer spending.
  • Weekly natural gas inventories increased by 32 bcf after increasing by 41 bcf a week ago.
  • The U.S. Treasury sold $21 bln in 10-yr TIPS at a high yield of 2.438% with a bid-to-cover ratio of 2.30x.
• Commodities:
  • WTI crude: +6.0% to $92.09/bbl
  • Gold: -2.5% to $4049.70/ozt
  • Copper: -2.3% to $6.34/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1376
  • GBP/USD: -0.4% to 1.3315
  • USD/CNH: +0.1% to 6.7782
  • USD/JPY: +0.4% to 163.79
• The Day Ahead:
  • 9:45 ET: Flash July S&P Global U.S. Manufacturing PMI (prior 52.5) and flash July S&P Global U.S. Services PMI (prior 48.8)
  • 10:00 ET: June New Home Sales (Briefing.com consensus 620,000; prior 580,000)