Bond Market Update

Bounce Extended Ahead of FOMC

• U.S. Treasuries climbed again on Tuesday, making for the third consecutive day of gains after most tenors set fresh 2026 lows late last week. The Tuesday advance unfolded in steady fashion as Treasuries started with modest gains after a volatile night in global tech stocks, building on those gains as the morning went on. Today's economic data slate had little impact on the action, as the Consumer Confidence report for July (90.8; Briefing.com consensus 92.1; prior 92.2) showed just a small dip. Treasuries reached their best levels around 11:00 ET amid reports that mediators in the U.S.-Iran conflict are hopeful that another deal will be made to restore the failed memorandum of understanding, which only lasted a few days. The news helped pressure WTI crude back below $80/bbl, where it finished the session. Treasuries, meanwhile, dipped from their highs in the afternoon, facing some light pressure after the U.S. Treasury capped this week's note auction slate with a weak $44 bln 7-yr note offering. Tomorrow's session will be headlined by the 14:00 ET release of the FOMC Statement for July, which is not widely expected to call for a rate hike, but the largest hedge fund in the U.S.—Citadel Securities—expects a surprise rate hike to be announced. The U.S. Dollar Index slipped 0.1% to 101.41 after an intraday rise toward its June high (101.80).
• Yield Check:
  • 2-yr: -4 bps to 4.28%
  • 3-yr: -5 bps to 4.30%
  • 5-yr: -4 bps to 4.36%
  • 10-yr: -4 bps to 4.60%
  • 30-yr: -3 bps to 5.10%

• News:
  • Japan's Prime Minister Takaichi plans to lower the food tax to 1% from 8% and is likely to raise the minimum wage.
  • South Korean regulators are expected to announce deposit requirements for ETF purchases on Friday.
  • The Swiss National Bank is expected to keep its rate at zero until the end of next year.
  • Japan's May BoJ Core CPI was up 2.7% yr/yr (last 2.7%).
  • South Korea's July Consumer Confidence rose to 106.8 from 106.6.
  • France's July Consumer Confidence rose to 86 from 84 (expected 85).
  • Italy's non-EU trade surplus reached EUR2.55 bln (last surplus of EUR3.84 bln).
  • Spain's June Retail Sales were up 0.5% yr/yr (last 1.3%) and Q2 Unemployment Rate rose to 9.87% from 10.8% (expected 10.1%).
• Today's Data:
  • The Conference Board's Consumer Confidence Index decreased to 90.8 in July (Briefing.com consensus: 92.1) from an upwardly revised 92.2 (from 91.2) in June. In the same period a year ago, the index stood at 95.2.
    • The key takeaway from the report is that consumers don't appear to be overly enthused about current business conditions or future business conditions.
  • The FHFA Housing Price Index was up 0.3% in May (Briefing.com consensus 0.0%) after a 0.1% decrease in April.
  • The S&P Case-Shiller Home Price Index was up 1.6% in May (Briefing.com consensus 1.3%) while the April reading was revised up to 1.2% from 1.1%.
  • The advance goods trade deficit hit $101.5 bln in June while the May deficit was revised to $105.9 bln from $105.8 bln.
  • Advance Retail Inventories were unchanged in June after increasing a revised 0.5% (from 0.6%) in May.
  • Advance Wholesale Inventories increased 0.3% in June after increasing 0.3% in May.
  • $44 bln 7-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.473% (4.022%).
    • Bid-to-cover: 2.49 (2.50).
    • Indirect bid: 70.1% (63.7%).
    • Direct bid: 16.9% (25.6%).
• Commodities:
  • WTI crude: -4.0% to $79.32/bbl
  • Gold: -0.9% to $4037.90/ozt
  • Copper: -0.3% to $6.36/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1388
  • GBP/USD: UNCH at 1.3291
  • USD/CNH: +0.1% to 6.7710
  • USD/JPY: +0.1% to 163.85
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 1.9%)
  • 10:30 ET: Weekly crude oil inventories (prior +2.01 mln)
  • 14:00 ET: July FOMC Decision (Briefing.com consensus 3.50-3.75%; prior 3.50-3.75%)