Bond Market Update

Longer Tenors Cough Up Week's Gains

• U.S. Treasuries finished the week on a lower note with little to show for after a brief midweek boost, which followed news that the Treasury will increase the upper limit of its buybacks of longer tenors. The Friday session was a unidirectional affair, as the long bond opened with a slim loss while shorter tenors started near their flat lines before spending the remainder of the session in a steady retreat that lifted the 30-yr yield toward its closing level from Tuesday while the 10-yr yield finished just below its 2026 high from the end of July (4.747%). Treasury Secretary Bessent warned yesterday that his department has multiple tools to address liquidity issues, but the threat has not invited additional buying interest so far. Today, Treasuries reached lows in the early afternoon, holding at those levels into the close even though crude oil saw limited movement. WTI crude ended just above $87/bbl, gaining nearly $5/bbl for the week, while the U.S. Dollar Index slipped 0.1% to 98.81, staying near its lowest level since mid-May. The Index lost 0.8% this week.
• Yield Check:
  • 2-yr: +4 bps to 4.23% (+6 bps this week)
  • 3-yr: +4 bps to 4.31% (+6 bps this week)
  • 5-yr: +4 bps to 4.42% (+6 bps this week)
  • 10-yr: +4 bps to 4.74% (+4 bps this week)
  • 30-yr: +4 bps to 5.28% (+1 bp this week)

• News:
  • Japan's Prime Minister Takaichi is planning to make some changes to her cabinet in the second half of September.
  • South Korea's exports through the first 20 days of August were up 56% yr/yr with chip exports almost tripling.
  • South Korea's finance ministry said that it is keeping a close watch on rising global bond yields.
  • China will expand its joint military exercises with Indonesia.
  • China is reportedly planning another round of economic discussions with Canada.
  • The latest consumer expectations survey for the eurozone showed a dip in year-ahead CPI expectations to 2.9% from 3.0% while the three-year outlook eased to 2.7% from 2.8%.
  • European Central Bank policymaker Kazaks reiterated that the ECB's September decision will be guided by data.
  • The French government is reportedly looking to renew a tax on large corporate profits that brought in about EUR7.5 bln of revenue in 2025.
  • China's July FDI was down 6.2% YTD (last -5.0%).
  • Japan's July National CPI was up 0.4% m/m (last 0.3%), rising 1.9% yr/yr (last 1.6%). July National Core CPI was up 1.8% yr/yr, as expected (last 1.6%). Flash August Manufacturing PMI hit 55.1, as expected (last 54.5) and flash August Services PMI hit 52.3 (last 51.2).
  • South Korea's July PPI was down 0.4% m/m (last 0.0%) but up 7.7% yr/yr (last 8.5%).
  • Australia's flash August Manufacturing PMI hit 52.0 (last 52.0) and flash Services PMI hit 52.9 (last 53.6).
  • New Zealand's July trade deficit reached NZD1.949 bln (expected deficit of NZD175 mln; prior deficit of NZD237 mln). July Credit Card Spending was up 5.3% yr/yr (last 3.2%).
  • India's flash August Manufacturing PMI hit 52.9 (expected 54.0; last 53.5) and flash Services PMI hit 54.5 (expected 53.8; last 53.3).
  • Eurozone's flash August Manufacturing PMI hit 52.8 (expected 51.8; last 51.9) and flash Services PMI hit 51.7 (expected 51.5; last 51.7).
  • Germany's flash August Manufacturing PMI hit 54.1 (expected 52.1; last 52.2) and flash Services PMI hit 48.5 (expected 50.1; last 49.8).
  • U.K.'s July Retail Sales were down 0.5% m/m (expected -0.4%; last 0.7%) but up 1.6% yr/yr (expected 2.2%; last 3.8%). July Core Retail Sales were down 0.9% m/m (expected -0.5%; last 0.9%) but up 2.3% yr/yr (expected 3.3%; last 5.0%). August flash Manufacturing PMI hit 51.5 (expected 51.6; last 51.9) and flash Services PMI hit 52.8 (expected 51.8; last 52.1).
  • France's flash August Manufacturing PMI hit 51.5 (expected 50.1; last 49.8) and flash Services PMI hit 48.4 (expected 49.4; last 49.6). August Business Survey rose to 103 from 101 (expected 101).
• Today's Data:
  • The S&P Global U.S. Manufacturing PMI hit 53.2 in the flash reading for August, down from 53.9 in July.
  • The S&P Global U.S. Services PMI hit 56.8 in the flash reading for August, up from 54.6 in July.
• Commodities:
  • WTI crude: -1.2% to $87.07/bbl
  • Gold: +2.4% to $4680.10/ozt
  • Copper: +1.9% to $6.59/lb
• Currencies:
  • EUR/USD: UNCH at 1.1682
  • GBP/USD: +0.2% to 1.3652
  • USD/CNH: UNCH at 6.7206
  • USD/JPY: UNCH at 159.02
• The Day Ahead:
  • Monday: Nothing of note
  • Tuesday: June FHFA Housing Price Index (prior 0.3%) and July S&P Case-Shiller Home Price Index (Briefing.com consensus 1.8%; prior 1.6%) at 9:00 ET; July New Home Sales (Briefing.com consensus 620,000; prior 628,000) and August Consumer Confidence (Briefing.com consensus 90.6; prior 90.8) at 10:00 ET; and $69 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -0.4%) at 7:00 ET; Q2 GDP - second estimate (Briefing.com consensus 1.5%; prior 1.5%), Q2 GDP Deflator - second estimate (Briefing.com consensus 6.3%; prior 6.3%), July Personal Income (Briefing.com consensus 0.2%; prior 0.2%), Personal Spending (Briefing.com consensus 0.2%; prior 0.3%), PCE Prices (Briefing.com consensus 0.1%; prior -0.1%), Core PCE Prices (Briefing.com consensus 0.2%; prior 0.1%), July Durable Orders (Briefing.com consensus 0.5%; prior 0.3%), and Durable Orders ex-transport (Briefing.com consensus 0.5%; prior 0.6%) at 8:30 ET; weekly crude oil inventories (prior +4.41 mln) at 10:30 ET; and $70 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: Weekly Initial Claims (Briefing.com consensus 210,000; prior 206,000), Continuing Claims (prior 1.799 mln), July advance International Trade in Goods (prior -$101.5 bln), July advance Retail Inventories (prior 0.0%), and advance Wholesale Inventories (prior 0.3%) at 8:30 ET; weekly natural gas inventories (prior +16 bcf) at 10:30 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
  • Friday: August Chicago PMI (Briefing.com consensus 57.0; prior 57.6) at 9:45 ET and final August University of Michigan Consumer Sentiment (Briefing.com consensus 51.0; prior 51.0) at 10:00 ET