Bond Market Update

30-Yr Yield Back In Spotlight

• U.S. Treasuries began the week with steady selling in longer tenors, driving the 30-yr yield to a fresh high for the year while the front end resisted, but also eventually gave in to the pressure. The trading day started in flat fashion after a night that saw the release of below-consensus flash Q2 GDP reading from Japan (0.3%; expected 0.5%) and underwhelming July growth figures from China. However, the weak GDP report from Japan did not stop selling in JGBs, driving Japan's 40-yr yield to a fresh 2026 high (4.059%), as the market continues expecting more rate hikes from the Bank of Japan. Back in the U.S., the long bond underperformed from the start, seeing additional pressure from an intraday rise in the price of oil. The 10-yr note followed suit, settling on its low, while shorter tenors finished at their morning lows. On its own, today's increase in the 30-yr yield to a fresh 19-year high was not surprising since the 30-yr yield ended last week just below its July high (5.281%), reflecting concerns about persistent inflation and deficits, and the uncertainty associated with massive AI investment spending. However, with the new 2026 high set today, the market is now curious to see if additional selling pressure builds to push the 30-yr yield past its 2007 high (5.408%) to levels from mid-2004. Crude oil climbed to a two-week high while the U.S. Dollar Index fell to its lowest level since early June before returning to little changed at 99.67.
• Yield Check:
  • 2-yr: +1 bp to 4.18%
  • 3-yr: +1 bp to 4.26%
  • 5-yr: +1 bp to 4.38%
  • 10-yr: +3 bps to 4.72%
  • 30-yr: +4 bps to 5.31%

• News:
  • The 60-day ceasefire agreement between the U.S. and Iran expired today. 
  • 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%).
• Today's Data:
  • The Empire State Manufacturing Survey rose to 20.6 in August (Briefing.com consensus 11.0), up from 15.6 in July.
  • The NAHB Housing Market Index rose to 35 in August (Briefing.com consensus 34) from 34 in July.
• Commodities:
  • WTI crude: +2.5% to $84.46/bbl
  • Gold: +0.8% to $4474.00/ozt
  • Copper: +0.2% to $6.62/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1574
  • GBP/USD: +0.1% to 1.3538
  • USD/CNH: UNCH at 6.7435
  • USD/JPY: +0.2% to 159.57
• The Day Ahead:
  • 8:30 ET: July Housing Starts (Briefing.com consensus 1.360 mln; prior 1.427 mln), Building Permits (Briefing.com consensus 1.390 mln; prior 1.367 mln), July Import Prices (prior 0.3%), Import Prices ex-oil (prior 0.4%), Export Prices (prior -0.6%), and Export Prices ex-agriculture (prior -0.7%)
  • 9:15 ET: July Industrial Production (Briefing.com consensus 0.3%; prior 0.1%) and Capacity Utilization (Briefing.com consensus 76.3%; prior 76.1%)
  • 10:00 ET: July Pending Home Sales (Briefing.com consensus 1.3%; prior -5.4%)