Bond Market Update

 Front End Leads Early Selling

• U.S. Treasuries are on track for a lower start in most tenors after last week's advance across the curve. Treasury futures spent the bulk of the overnight session in a sideways range, slipping to lows during the past hour. The selling has been accompanied by some slight weakness in other sovereign debt while crude oil is on the rise after President Trump said that the U.S. will allow time for economic pressure to mount on Iran. Besides the latest developments in the U.S.-Iran conflict, the overnight news flow was on the light side. China reported another deflationary CPI reading for July (-0.1%; expected 0.2%), causing a deceleration in the year-over-year rate to just 0.5% from 1.0%. Investors will not receive any U.S. data today, but things will pick up later this week with July CPI (Briefing.com consensus 0.1%; prior -0.4%) and Core CPI (Briefing.com consensus 0.2%; prior 0.0%) set to be released on Wednesday morning. Crude oil has approached $80/bbl while the U.S. Dollar Index is up 0.2% at 99.72.
• Yield Check:
  • 2-yr: +2 bps to 4.23%
  • 3-yr: +2 bps to 4.29%
  • 5-yr: +2 bps to 4.38%
  • 10-yr: +1 bp to 4.67%
  • 30-yr: UNCH at 5.21%

• News:
  • The Bank of Japan's latest summary of opinions showed overall hawkishness in sentiment among policymakers.
  • Japanese investors sold the second-largest monthly amount of Australian bonds as rising JGB rates prompted repatriation of foreign investments.
  • The Reserve Bank of Australia will meet overnight but a rate hike is not expected at this time.
  • China's July CPI was down 0.1% m/m (expected 0.2%; last -0.3%) but up 0.5% yr/yr (expected 0.8%; last 1.0%). July PPI was up 3.5% yr/yr (expected 3.9%; last 4.1%).
  • Japan's June Current Account surplus reached JPY1.40 trln (expected surplus of JPY2.50 trln; last surplus of JPY3.06 trln). July Bank Lending was up 5.4% yr/yr (expected 5.7%; last 5.7%). July Economy Watchers Current Index rose to 45.7 from 44.0 (expected 44.6).
  • Eurozone's August Sentix Investor Confidence rose to 0.9 from -3.1 (expected -0.7).
• Commodities:
  • WTI Crude: +1.6% to $79.43/bbl
  • Gold: -0.1% to $4396.60/ozt
  • Copper: +0.5% to $6.623/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1549
  • GBP/USD: +0.1% to 1.3498
  • USD/CNH: +0.1% to 6.7454
  • USD/JPY: +0.7% to 158.86
• No Data on Today's Schedule