Bond Market Update

Waiting Game

• U.S. Treasuries are playing a waiting game in front of the 8:30 a.m. ET release of the July Producer Price Index. That wait has featured a modest dip in yields across the curve, which have been responsive to lower oil prices (WTI -1.9% to $81.66/bbl). The drop in oil prices is being attributed to an IEA report forecasting a demand drop this year that is larger than previously expected. That, frankly, is a dubious catalyst considering the IEA report was out before yesterday's open and oil prices settled yesterday slightly higher. If anything, we'd chalk it up to finicky trading activity that has been endemic to the oil market as the U.S. and Iran remain in a stalemate and standoff over the opening of the Strait of Hormuz. Today's session will also feature the $25 billion 30-yr bond auction at 1:00 p.m. ET, so supply dynamics will continue to be part of the trading landscape.
• Yield Check:
  • 2-yr: -2 bps to 4.18%
  • 3-yr: -2 bps to 4.25%
  • 5-yr: -2 bps to 4.35%
  • 10-yr: -1 bp to 4.67%
  • 30-yr: -1 bp to 5.24%

• News:
  • The Trump administration will rely on economic sanctions and the naval blockade to hurt Iran economically. Bloomberg
  • Japan's government will support a faster rate increase from the Bank of Japan. Bloomberg
  • Mexico wants lower auto tariffs amid trade talks. WSJ
  • Republican states rolling back property taxes. WSJ
  • The Norges Bank left its key policy rate unchanged at 4.25% but suggested it may need to raise rates again.
  • Market pricing continues to suggest a BOJ rate hike could happen in either September or October
  • U.K.'s June GDP 0.3% m/m (expected 0.0%; prior 0.0%) and 1.1% yr/yr (expected 0.8%; prior 1.2%), Q2 GDP 0.4% qtr/qtr (expected 0.4%; prior 0.6%) and 1.2% yr/yr (expected 1.1%; prior 0.9%)
• Commodities:
  • WTI crude: -2.1% to $81.49/bbl
  • Gold: -0.5% to $4444.40/ozt
  • Copper: -0.6% to $6.58/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1536
  • GBP/USD: unch at 1.3493
  • USD/CNH: flat at 6.7447
  • USD/JPY: -0.1% to 159.29
• The Day Ahead:
  • 08:30 ET: July PPI (Briefing.com consensus +0.1%; prior -0.3%)
  • 08:30 ET: July Core PPI (Briefing.com consensus +0.3%; prior -0.2%)
  • 08:30 ET: Weekly Initial Jobless Claims (Briefing.com consensus at 205K; prior 199K)
  • 08:30 ET: Weekly Continuing Jobless Claims (prior 1.801 mln)
• Treasury Auctions:
  • $25 bln 30-yr Treasury bond auction results at 13:00 ET