Bond Market Update

Steady Start Ahead

• U.S. Treasuries are on track for a mostly flat start after Friday's retreat across the curve. Treasury futures began inching higher on Sunday evening, continuing their push into the night at a measured pace. The market met some resistance after the start of the European session, followed by some backtracking from highs over the past three hours. The new week got off to an upbeat start in global equities while sovereign debt has been mixed. JGBs retreated as expectations for more rate hikes from the Bank of Japan overshadowed the overnight release of a disappointing GDP report for Q2. Similarly, China's growth figures for July were shy of expectations. In other news, the U.S. began annual joint military exercises with South Korea, but they were scaled back after a request from President Trump. Crude oil continues hovering near $82/bbl while the U.S. Dollar Index is down 0.2% at 99.46.
• Yield Check:
  • 2-yr: UNCH at 4.17%
  • 3-yr: UNCH at 4.25%
  • 5-yr: UNCH at 4.36%
  • 10-yr: -1 bp to 4.69%
  • 30-yr: UNCH at 5.27%

• News:
  • Alphabet (GOOG) is planning to sell AUD5 bln worth of Kangaroo bonds.
  • Fitch affirmed the U.K.'s AA- rating with a Stable outlook.
  • Rightmove reported a sharp drop in average new listed asking prices for homes in the U.K.
  • China's July Industrial Production was up 4.5% yr/yr (expected 5.0%; last 5.3%), July Fixed Asset Investment fell 6.7% yr/yr (expected -6.2%; last -5.7%), July Retail Sales rose 0.6% yr/yr (expected 1.5%; last 1.0%), July Unemployment Rate rose to 5.2% from 5.0% (expected 5.1%).
  • Japan's flash Q2 GDP expanded 0.3% qtr/qtr (expected 0.5%; last 0.5%), growing 1.1% yr/yr (expected 2.0%; last 1.9%). Q2 GDP Capital Expenditure fell 1.2% qtr/qtr (expected 0.4%; last -1.0%), Q2 GDP External Demand was up 0.5% qtr/qtr (expected 0.3%; last 0.3%), Q2 GDP Private Consumption was unchanged qtr/qtr (expected 0.5%; last 0.5%), and Q2 GDP Price Index was up 2.6% yr/yr (expected 2.4%; last 3.2%). June Industrial Production rose 1.9% m/m (expected 1.3%; last 0.1%) and Capacity Utilization was up 4.1% m/m (last 0.1%).
  • South Korea's July trade surplus reached $30.39 bln (expected $30.32 bln; last $36.09 bln) as imports grew 26.5% yr/yr, as expected (last 30.0%), and exports jumped 63.0% yr/yr (expected 62.8%; last 70.7%).
  • Singapore's July trade surplus reached SGD10.72 bln (last surplus of SGD13.87 bln) as non-oil exports fell 0.3% m/m (last -8.8%) but were up 24.2% yr/yr (last 24.4%).
  • New Zealand's July Performance of Services Index fell to 50.6 from 50.9. July Electronic Card Retail Sales rose 1.3% m/m (last -1.3%), increasing 3.4% yr/yr (last 1.3%). July FPI was up 0.1% m/m (last 0.6%).
• Commodities:
  • WTI Crude: +0.1% to $82.49/bbl
  • Gold: +0.4% to $4456.70/ozt
  • Copper: +1.1% to $6.688/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1592
  • GBP/USD: +0.2% to 1.3556
  • USD/CNH: UNCH at 6.7401
  • USD/JPY: UNCH at 159.25
• Data out Today:
  • 8:30 ET: August Empire State Manufacturing Index (Briefing.com consensus 11.0; prior 15.6)
  • 10:00 ET: August NAHB Housing Market Index (Briefing.com consensus 34; prior 34) 
  • 16:00 ET: June Net Long-Term TIC Flows (prior $232.7 bln)