Bond Market Update

 On Defense as FOMC Looms

• U.S. Treasuries are on track for a lower start with shorter tenors expected to pace the pullback from three days of gains. Treasury futures began facing pressure in early evening trade, adding to their losses as the night went on. Other sovereign debt has also retreated as oil rebounded, recovering yesterday's loss. Investors received just a small slate of economic data overnight and things will remain quiet on that front during the U.S. session, though the FOMC will release its latest policy Statement at 14:00 ET. The market does not expect a rate hike announcement today, but Citadel Securities has forecast a rate hike for this afternoon, so investors will be watching closely this afternoon. Crude oil is back near its 50-day moving average (83.26) while the U.S. Dollar Index is flat at 101.41.
• Yield Check:
  • 2-yr: +3 bps to 4.31%
  • 3-yr: +4 bps to 4.34%
  • 5-yr: +3 bps to 4.39%
  • 10-yr: +3 bps to 4.63%
  • 30-yr: UNCH at 5.10%

• News:
  • An earthquake in Japan prompted multiple companies to close their facilities for inspections.
  • The Trump administration banned imports of new Chinese robots and power inverters.
  • European Central Bank policymaker Patsalides said that the outcome of the September policy meeting remains uncertain.
  • Australia's Q2 CPI was up 0.6% qtr/qtr (expected 0.7%; last 1.4%), rising 3.9% yr/yr (expected 4.1%; last 4.1%). June Monthly CPI Indicator was up 3.8% (expected 4.0%; last 4.0%).
  • Germany's June Import Price Index was down 0.7% m/m, as expected (last 0.7%) but up 6.1% yr/yr (expected 6.0%; last 6.8%).
  • U.K.'s June Mortgage Approvals reached 58,200 (expected 57,000; last 56,570), June Mortgage Lending reached GBP7.73 bln (expected GBP3.95 bln; last GBP3.27 bln), and June net lending to individuals reached GBP9.50 bln (expected GBP5.50 bln; last GBP4.60 bln).
  • Italy's May Industrial Sales were up 0.6% m/m (last -0.2%), rising 5.3% yr/yr (last 2.7%).
  • Swiss July ZEW Expectations rose to 10.0 from -25.0.
• Commodities:
  • WTI Crude: +4.5% to $82.81/bbl
  • Gold: -0.2% to $4031.50/ozt
  • Copper: -0.7% to $6.317/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1384
  • GBP/USD: +0.1% to 1.3294
  • USD/CNH: UNCH at 6.7684 
  • USD/JPY: -0.1% to 163.66
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -6.4%; 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%)