Bond Market Update

 Lower Start Ahead

• U.S. Treasuries are on track for a lower start with shorter tenors set to give back yesterday's gains at the open. Treasury futures began inching lower in early evening action, adding to their losses as the night went on. The market reached lows at the start of the European session, followed by a shallow bounce. Overnight trade saw ongoing volatility in Asian equities after Samsung released underwhelming quarterly results. Elsewhere, Japan sold 30-yr JGBs to solid demand, resulting in a slight dip in the 30-yr JGB yield (3.98%) while yields on other tenors inched higher. The overnight data slate included a much better than expected Industrial Production report from Germany (0.9% m/m; expected 0.1%) while the U.S. data slate will be limited to the 8:30 ET release of the Trade Balance for May (Briefing.com consensus -$78.8 bln; prior -$55.9 bln). Later in the day, the U.S. Treasury will sell $58 bln in 3-yr notes. Crude oil hovers near $69/bbl while the U.S. Dollar Index is up 0.1% at 100.91.
• Yield Check:
  • 2-yr: +2 bps to 4.14%
  • 3-yr: +1 bp to 4.16%
  • 5-yr: +2 bps to 4.23%
  • 10-yr: +2 bps to 4.50%
  • 30-yr: +2 bps to 5.01%

• News:
  • The World Bank expects China's GDP to decelerate to 4.4% in 2026 with another dip to 4.3% expected in 2027.
  • Germany's Finance Minister Klingbeil acknowledged that Germany's debt will reach 69.5% of GDP in 2027. NATO officials are meeting in Ankara today and tomorrow.
  • Japan's May Household Spending was up 3.7% m/m (expected 1.4%; last 1.6%) but down 0.4% yr/yr (expected -2.3%; last -0.5%). May Overall Wage Income increased 3.2% yr/yr (expected 3.4%; last 3.6%) and May Overtime Pay increased 2.9% yr/yr (last 4.8%). May Leading Index rose to 116.8 from 116.1 (expected 116.9) and Coincident Indicator was up 0.4% m/m (last 1.3%).
  • Germany's May Industrial Production was up 0.9% m/m (expected 0.1%; last 0.2%), rising 0.1% yr/yr (last -0.8%).
  • U.K.'s June Halifax House Price Index was up 0.2% m/m (expected 0.1%; last -0.2%), rising 0.6% yr/yr (last 0.5%).
  • France's May trade deficit reached EUR6.9 bln (expected deficit of EUR5.9 bln; last deficit of EUR5.4 bln).
• Commodities:
  • WTI Crude: +0.8% to $69.07/bbl
  • Gold: -0.3% to $4156.30/ozt
  • Copper: -0.1% to $6.227/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1433
  • GBP/USD: UNCH at 1.3387
  • USD/CNH: +0.1% to 6.7968
  • USD/JPY: -0.1% to 161.92
• Data out Today:
  • 8:30 ET: May Trade Balance (Briefing.com consensus -$78.8 bln; prior -$55.9 bln)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results