Bond Market Update

Long End Continues Recent Weakness

• U.S. Treasuries are on track for a lower start in longer tenors while the short end is expected to show some early relative strength after underperforming yesterday. Treasury futures faced some light pressure in early evening action, followed by a brief bounce during the Asian session. However, the rest of the night saw a slow return to lows even as other sovereign debt advanced. The overnight news and data flow was on the light side. China reported another deflationary CPI reading (-0.3%; expected -0.2%) while a former Bank of Japan official cautioned that the central bank could tighten its policy rate past 2%. The U.S. military carried out additional strikes against Iran and President Trump said that he already received a request from the Iranian side to return to the prior deal. Crude oil continues hovering near its 200-day moving average (74.24) while the U.S. Dollar Index is little changed at 101.01.
• Yield Check:
  • 2-yr: UNCH at 4.20%
  • 3-yr: +1 bp to 4.25%
  • 5-yr: +1 bp to 4.32%
  • 10-yr: +2 bps to 4.59%
  • 30-yr: +2 bps to 5.09%

• News:
  • Moody's noted that Japan's sovereign rating appears Stable despite plans for aggressive fiscal spending.
  • The U.K.'s probable next prime minister will reportedly focus on aiding small businesses and improving the cost of living.
  • China's June CPI was down 0.3% m/m (expected -0.2%; last -0.1%) but up 1.0% yr/yr (expected 1.1%; last 1.2%). June PPI was up 4.1% yr/yr, as expected (last 3.9%).
  • Japan's June Machine Tool Orders rose 0.9% m/m (expected -0.3%; last 0.8%).
  • New Zealand's June Manufacturing PMI hit 59.7 (last 51.3).
  • Germany's May trade surplus reached EUR19.1 bln (expected EUR14.9 bln; last EUR14.7 bln) as imports fell 2.5% m/m (expected 0.1%; last 1.1%) and exports rose 0.9% m/m (expected -0.3%; last 0.8%).
• Commodities:
  • WTI Crude: +0.6% to $73.95/bbl
  • Gold: +0.8% to $4115.90/ozt
  • Copper: +2.0% to $6.233/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1425
  • GBP/USD: UNCH at 1.3388
  • USD/CNH: -0.1% to 6.7983
  • USD/JPY: UNCH at 162.48
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 215,000) and Continuing Claims (prior 1.814 mln)
  • 10:00 ET: June Existing Home Sales (Briefing.com consensus 4.20 mln; prior 4.17 mln)
  • 10:30 ET: Weekly natural gas inventories (prior +87 bcf)
• Treasury Auctions:
  • 13:00 ET: $22 bln 30-yr Treasury bond reopening results