Bond Market Update

Two-Day Skid Halted

• U.S. Treasuries snapped their two-day skid on Thursday, spending the session in a steady bounce off their opening lows. The cash session started with modest losses that were paced by the long end while shorter tenors were eager to bounce from the start. The overnight news flow included reports of more hostilities between the U.S. and Iran, but that was not surprising after President Trump essentially announced the action yesterday. Crude oil climbed toward $75/bbl in early morning trade but reversed before the cash start in the Treasury market, continuing its pullback into the afternoon alongside the bounce in Treasuries. The daylong rally received some intraday support from a strong $22 bln 30-yr bond sale, which made for a good finish to this week's trifecta of solid auctions. The U.S. Dollar Index dipped 0.1% to 100.91, returning to little changed for the week.
• Yield Check:
  • 2-yr: -4 bps to 4.16%
  • 3-yr: -4 bps to 4.20%
  • 5-yr: -4 bps to 4.27%
  • 10-yr: -3 bps to 4.54%
  • 30-yr: -1 bp to 5.05%

• 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%).
• Today's Data:
  • Existing home sales decreased 2.4% month-over-month in June to a seasonally adjusted annual rate of 4.09 million (Briefing.com consensus: 4.20 million) from an upwardly revised 4.19 million (from 4.17 million) in May. Sales were up 2.8% on a year-over-year basis. 
    • The key takeaway from the report is that affordability conditions improved across all regions as wage growth outpaced home price growth; however, overall sales were still pressured by high prices and elevated mortgage rates.
  • For the week ending July 4, initial jobless claims decreased by 2,000 to 215,000 (Briefing.com consensus: 220,000), which is the same level they were at in December 2025. For the week ending June 27, continuing jobless claims increased by 8,000 to 1.814 million, which is roughly where they stood in March.
    • The key takeaway from the report is the same key takeaway as other recent reports: the low level of initial jobless claims continues to reinforce the understanding that layoff activity remains quite low overall.
  • Weekly natural gas inventories increased by 61 bcf after increasing by 87 bcf a week ago.
  • $22 bln 30-year Treasury bond reopening results (prior 12-auction average):
    • High yield: 5.058% (4.829%).
    • Bid-to-cover: 2.44 (2.38).
    • Indirect bid: 77.7% (64.4%).
    • Direct bid: 12.2% (23.9%).
• Commodities:
  • WTI crude: -1.9% to $72.10/bbl
  • Gold: +1.4% to $4141.60/ozt
  • Copper: +2.5% to $6.26/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1433
  • GBP/USD: +0.2% to 1.3415
  • USD/CNH: -0.1% to 6.7952
  • USD/JPY: -0.1% to 162.34
• No Data on Tomorrow's Schedule