Bond Market Update

Long End Flashes Monday Strength

• U.S. Treasuries began the week with gains in longer tenors while the short end underperformed, finishing with a slim loss. The Monday session was quiet, as the market did not receive any significant U.S. data while the overseas slate was also on the light side. As a result, today's biggest story was Treasury Bessent's scheduled press conference to discuss the new approach to the conflict with Iran. In addition, CNBC reported this morning that the Treasury could use its general account, which is at almost $1 trillion, to fund buybacks of longer-dated Treasuries. Treasuries climbed out of the gate with longer tenors leading the advance while the 2-yr note resisted. The market continued climbing into the early afternoon, reaching highs shortly before Treasury Secretary Bessent began his remarks. He outlined "Operation Economic Outcast", which involves sanctions on multiple Iran-linked entities with five critical sectors potentially facing secondary sanctions. Brokerage networks and shadow-fleet vessels will also be targeted. Lastly, countries that are found to be cooperating with Iran will also face consequences. Treasuries finished the day a bit below highs that were seen ahead of Mr. Bessent's speech with the long bond maintaining its lead. Crude oil fell back below $85/bbl while the U.S. Dollar Index rose 0.2% to 99.01.
• Yield Check:
  • 2-yr: +1 bp to 4.24%
  • 3-yr: -1 bp to 4.30%
  • 5-yr: -2 bps to 4.41%
  • 10-yr: -3 bps to 4.70%
  • 30-yr: -5 bps to 5.23%

• News:
  • President Trump is looking to impose a 7.5% tariff on imports from China, which would restore the overall tariff rate on imports from China to 20%, according to Bloomberg.
  • Trade talks between Canada and the U.S. collapsed over the weekend, resulting in an implementation of a 50% tariff on some Canadian imports to the U.S. Canada will impose retaliatory tariffs on September 8.
  • Japan's Ministry of Finance is expected to set the assumed interest rate for FY27/28 at 3.8% for debt cost calculations.
  • Bank of Japan Deputy Governor Himino is expected to hint at more rate hikes during a speech scheduled for Thursday.
  • European Central Bank policymaker Cipollone said that he does not see any signs of stagflation.
  • Singapore's July CPI was down 0.2% m/m (last 0.0%) but up 2.2% yr/yr (last 1.9%).
  • New Zealand's Q2 Retail Sales fell 0.5% qtr/qtr (expected 0.1%; last 1.0%) and Core Retail Sales rose 0.7% qtr/qtr (expected 0.3%; last 1.1%).
• Commodities:
  • WTI crude: -2.4% to $84.98/bbl
  • Gold: +0.3% to $4695.00/ozt
  • Copper: +0.2% to $6.60/ozt
• Currencies:
  • EUR/USD: -0.1% to 1.1662
  • GBP/USD: -0.1% to 1.3629
  • USD/CNH: UNCH at 6.7223
  • USD/JPY: +0.2% to 159.18
• The Day Ahead:
  • 9:00 ET: 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%)
  • 10:00 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)
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results