Bond Market Update

Four-Day Skid Snapped

• U.S. Treasuries ended the week on a higher note, but the shallow Friday bounce only recovered some of yesterday's losses, leaving the complex with solid losses for the week. Treasuries started the session in positive territory even though overnight action saw the release of a sizable batch of data from Asia and Europe, which was reflective of some general economic improvement across the board. The higher start pressured yields on 10s and shorter tenors from their highest settlement levels of the year with the market seeing some additional buying into the late morning. A pullback in the price of oil helped Treasuries build on their early gains, and so did a mid-morning report that Pakistan and Iran are considering a new approach to talks with the U.S. after some pressure from China. Meanwhile, President Trump is reportedly close to intensifying the military campaign against Iran. The final three hours of action saw a retreat from highs that erased the intraday gain in the long bond while shorter tenors ended just above their starting levels. Crude oil retreated from a six-week high, falling back below $90/bbl, but still added nearly $8/bbl for the week, while the U.S. Dollar Index spent the day near its unchanged level at 101.44, adding 0.7% for the week.
• Yield Check:
  • 2-yr: -3 bps to 4.33% (+16 bps this week)
  • 3-yr: -3 bps to 4.36% (+16 bps this week)
  • 5-yr: -4 bps to 4.43% (+16 bps this week)
  • 10-yr: -2 bps to 4.68% (+14 bps this week)
  • 30-yr: -1 bp to 5.16% (+10 bps this week)

• News:
  • President Trump is planning to impose tariffs on 60 trading partners, including the EU. These tariffs will replace the 10% global tariff that is scheduled to expire due to a court ruling.
  • The U.S. Treasury's latest report on Macroeconomic and Foreign Exchange Policies did not label any trading partners as currency manipulators.
  • South Korea's regulators announced that increased cash requirements for leveraged ETF purchases will come into effect sooner than originally planned.
  • South Korea's President Lee will be meeting with big tech CEOs in San Francisco today.
  • Japan is setting up a panel to manage the flow of foreign nationals into the country, fulfilling Prime Minister Takaichi's campaign pledge.
  • European Central Bank policymaker Kocher said that second-round effects of inflation have not become apparent, but he is ready to vote for a September hike if needed.
  • The ECB's latest Survey of Professional Forecasters showed no change in inflation expectations for 2026 and a ten-basis point uptick for 2027. GDP growth in 2026 is expected at 0.6%, down from the previous forecast for a 1.0% increase while the outlook for 2027 was trimmed to 1.2% from 1.3%.
  • Japan's June National CPI was up 0.3% m/m (last 0.4%), rising 1.7% yr/yr (last 1.5%). June National Core CPI was up 1.6% yr/yr, as expected (last 1.4%). Flash July Manufacturing PMI hit 54.7 (expected 55.0; last 54.8) and flash Services PMI hit 51.9 (last 52.2).
  • Australia's flash July Manufacturing PMI hit 51.7 (last 51.5) and flash Services PMI hit 53.0 (last 50.5).
  • Singapore's Q1 URA Property Index was up 0.5% qtr/qtr, as expected (last 0.9%).
  • India's flash July Manufacturing PMI hit 53.9 (last 54.2) and flash Services PMI hit 53.1 (last 57.4).
  • Eurozone's flash July Manufacturing PMI hit 52.0 (expected 51.5; last 51.4) and flash Services PMI hit 51.6 (expected 49.8; last 49.4).
  • Germany's August GfK Consumer Climate fell to -29.6 from -29.3 (expected -28.7). Flash July Manufacturing PMI hit 52.2 (expected 50.4; last 50.3) and flash Services PMI hit 49.6 (expected 49.0; last 48.6).
  • U.K.'s July GfK Consumer Confidence rose to -17 from -23 (expected -22). June Retail Sales were up 1.0% m/m (expected -0.3%; last 1.2%), rising 4.2% yr/yr (expected 2.3%; last 3.5%). June Core Retail Sales were up 1.1% m/m (expected -0.4%; last 1.2%), rising 5.4% yr/yr (expected 3.2%; last 4.9%). Flash July Manufacturing PMI hit 52.8 (expected 52.0; last 52.5) and flash Services PMI hit 51.8 (expected 49.4; last 48.8).
  • France's flash July Manufacturing PMI hit 50.0 (expected 51.0; last 51.2) and flash Services PMI hit 49.8 (expected 47.5; last 46.8).
• Today's Data:
  • New home sales increased 1.6% month-over-month in June to a seasonally adjusted annual rate of 628,000 (Briefing.com consensus: 620,000) from an upwardly revised 618,000 (from 580,000) in May. On a year-over-year basis, new home sales were down 5.6%.
    • The key takeaway from the report is that monthly sales increases were seen in all regions, except the high-priced West region, where added affordability constraints are posed by higher mortgage rates.
  • The S&P Global U.S. Manufacturing PMI hit 53.8 in the flash reading for July, down from 53.9 in June.
  • The S&P Global U.S. Services PMI hit 53.6 in the flash reading for July, up from 51.2 in June.
• Commodities:
  • WTI crude: -3.0% to $89.34/bbl
  • Gold: +0.5% to $4071.30/ozt
  • Copper: +0.3% to $6.36/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1370
  • GBP/USD: +0.1% to 1.3326
  • USD/CNH: -0.1% to 6.7718
  • USD/JPY: UNCH at 163.82
• The Week Ahead:
  • Monday: June Durable Orders (Briefing.com consensus 0.9%; prior 1.3%) and Durable Orders -ex transportation (Briefing.com consensus 2.0%; prior -4.5%) at 8:30 ET; $69 bln 2-yr Treasury note auction results at 11:30 ET; and $70 bln 5-yr Treasury note auction results at 13:00 ET
  • Tuesday: June advance International Trade in Goods (prior -$105.8 bln), advance Retail Inventories (prior 0.6%), and advance Wholesale Inventories (prior 0.3%) at 8:30 ET; May FHFA Housing Price Index (Briefing.com consensus 0.0%; prior -0.1%) and May S&P Case-Shiller Home Price Index (Briefing.com consensus 1.3%; prior 1.1%) at 9:00 ET; July Consumer Confidence (Briefing.com consensus 92.1; prior 91.2) at 10:00 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET 
  • Wednesday: Weekly MBA Mortgage Index (prior 1.9%) at 7:00 ET; weekly crude oil inventories (prior +2.01 mln) at 10:30 ET; and July FOMC Decision (Briefing.com consensus 3.50-3.75%; prior 3.50-3.75%)
  • Thursday: Advance Q2 GDP (Briefing.com consensus 2.3%; prior 2.1%), advance Q2 GDP Deflator (Briefing.com consensus 3.7%; prior 3.6%), June Personal Income (Briefing.com consensus 0.3%; prior 0.7%), Personal Spending (Briefing.com consensus 0.4%; prior 0.7%), PCE Prices (Briefing.com consensus -0.1%; prior 0.4%), Core PCE Prices (Briefing.com consensus 0.2%; prior 0.3%), weekly Initial Claims (Briefing.com consensus 203,000; prior 187,000), and Continuing Claims (prior 1.796 mln) at 8:30 ET; and weekly natural gas inventories (prior +32 bcf) at 10:30 ET
  • Friday: Q2 Employment Cost Index (Briefing.com consensus 0.8%; prior 0.9%) at 8:30 ET; July Chicago PMI (Briefing.com consensus 56.5; prior 56.7) at 9:45 ET; and final July University of Michigan Consumer Sentiment (Briefing.com consensus 54.4; prior 54.4) at 10:00 ET