Bond Market Update

Looking To Extend Bounce

• U.S. Treasuries are on track for a modestly higher start, looking to build on their cautious advance from Tuesday. Treasury futures spent the early portion of the night in a sideways range, rising to highs as the focus shifted from action in Asia to Europe. Pre-market highs were reached about four hours ago, followed by a small pullback from highs. Overnight action saw a volatile showing from Asian equities while JGBs climbed after recent weakness drove yields on longer tenors to fresh highs for the year. Economic data released overnight included an in-line final July CPI report from the eurozone and stubborn inflation in the U.K. The U.S. session will not feature any top-tier data today, but the FOMC will release the Minutes from its July meeting at 14:00 ET, preceded by a $16 bln 20-yr bond auction 13:00 ET. Crude oil is rising toward $86/bbl while the U.S. Dollar Index is down 0.2% at 99.43.
• Yield Check:
  • 2-yr: -2 bps to 4.16%
  • 3-yr: -2 bps to 4.23%
  • 5-yr: -2 bps to 4.35%
  • 10-yr: -3 bps to 4.69%
  • 30-yr: -1 bp to 5.28%

• News:
  • President Trump said that the implementation of a 50% tariff on Canadian imports could be paused for a few days. 
  • President Trump said that he wants to meet with North Korea's Leader Kim Jong Un in November.
  • Moody's affirmed Australia's AAA rating with a Stable Outlook.
  • European Central Bank policymaker Rehn said that he has not seen clear signs of second-round effects, though he conceded that it is essential to anchor inflation expectations, while ECB President Lagarde said that the region can't miss out on the AI revolution.
  • Japan's June Core Machinery Orders were up 9.7% m/m (expected 7.2%; last -12.4%), rising 16.9% yr/yr (expected 10.8%; last -1.9%).
  • Australia's Q2 Wage Price Index was up 0.8% qtr/qtr, as expected (last 0.8%), rising 3.2% yr/yr, as expected (last 3.2%).
  • New Zealand's Q2 Input PPI was up 2.9% qtr/qtr (expected 1.3%; last 1.4%) and Output PPI was up 1.6% qtr/qtr (expected 0.8%; last 0.8%).
  • Eurozone's July CPI was up 0.2% m/m, as expected (last -0.1%), rising 2.9% yr/yr, as expected (last 2.8%). July Core CPI was unchanged m/m, as expected (last 0.2%), rising 2.5% yr/yr, as expected (last 2.4%). June Current Account surplus reached EUR35.10 bln (expected surplus of EUR26.8 bln; last surplus of EUR25.1 bln).
  • U.K.'s July CPI was up 0.3% m/m, as expected (last 0.1%), rising 2.9% yr/yr, as expected (last 2.6%). July Core CPI was up 0.2% m/m (expected 0.1%; last 0.3%), rising 2.6% yr/yr (expected 2.5%; last 2.6%). July Input PPI was down 1.7% m/m (expected 0.0%; last -1.9%) and Output PPI was up 0.2% m/m, as expected (last -0.1%).
  • Swiss Q2 Industrial Production was up 5.5% yr/yr (expected -4.7%; last -7.6%).
• Commodities:
  • WTI Crude: +1.1% to $85.85/bbl
  • Gold: UNCH at $4419.00/ozt
  • Copper: -1.1% to $6.42/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1604
  • GBP/USD: +0.1% to 1.3553
  • USD/CNH: -0.1% to 6.7403
  • USD/JPY: -0.3% to 159.13
• Data Out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -0.4%; prior 3.6%)
  • 10:30 ET: Weekly crude oil inventories (prior +17.4 mln)
  • 14:00 ET: July FOMC Minutes
• Treasury Auctions:
  • 13:00 ET: $16 bln 20-yr Treasury bond auction results