Bond Market Update

 Long Bond Watch Continues

• U.S. Treasuries are on track for a lower start with relative weakness in longer tenors set to push the 30-yr yield to a fresh high for the year, barring a late bid ahead of the cash open. Treasury futures held their ground in early evening action, slipping to lows as the focus shifted from Asia to Europe. Treasury futures have risen off lows over the past couple hours, but they remain in the red alongside other sovereign debt. The overnight selling followed news that a ship traversing the Strait of Hormuz was hit by a missile, serving as a reminder of the rapidly shifting situation in the Middle East. The overnight data flow included above-consensus sentiment surveys from Germany and the eurozone while the U.S. session will feature July Housing Starts (Briefing.com consensus 1.360 mln; prior 1.427 mln) and Building Permits (Briefing.com consensus 1.390 mln; prior 1.367 mln) at 8:30 ET. Crude oil is approaching $85/bbl while the U.S. Dollar Index is flat at 99.66.
• Yield Check:
  • 2-yr: +1 bp to 4.19%
  • 3-yr: +1 bp to 4.27%
  • 5-yr: +1 bp to 4.39%
  • 10-yr: +2 bps to 4.74%
  • 30-yr: +2 bps to 5.33%

• News:
  • China's National Bureau of Statistics expects CPI to continue increasing mildly in the second half.
  • There are growing concerns that China's consumer subsidies pulled past demand forward rather than create sustainable growth.
  • South Korea is reportedly discussing military cooperation with U.S. forces in the Middle East.
  • European Central Bank Chief Economist Lane said that inflation is expected to remain around 3.0% for the remainder of the year.
  • Australia's August Westpac Consumer Sentiment was up 6.0% (last 4.1%).
  • Eurozone's August ZEW Economic Sentiment rose to 31.4 from 23.4 (expected 25.9).
  • Germany's August ZEW Economic Sentiment rose to 34.2 from 26.3 (expected 30.1) and ZEW Current Conditions rose to -61.1 from -77.6 (expected -68.8).
  • U.K.'s June three-month Employment increased by 83,000 (last 147,000), June Average Earnings Index + Bonus was up 4.1% yr/yr (expected 4.0%; last 4.4%), June Unemployment Rate remained at 4.9% (expected 4.8%). July Claimant Count decreased by 11,000 (expected 16,500; last -6,400). Q1 Labor Productivity was up 0.5% (expected -0.5%; last -0.7%).
• Commodities:
  • WTI Crude: +0.6% to $84.97/bbl
  • Gold: -0.6% to $4449.30/ozt
  • Copper: -0.9% to $6.555/lb
• Currencies:
  • EUR/USD: UNCH at 1.1576
  • GBP/USD: -0.1% to 1.3527
  • USD/CNH: +0.1% to 6.7459
  • USD/JPY: +0.2% to 159.70
• Data out Today:
  • 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%)