Bond Market Update

Extending Monday Gains

• U.S. Treasuries are on track for a higher start, looking to build on their advance from Monday. Treasury futures faced some light pressure in early evening trade, but the losses were reversed at the start of the European session, followed by a recent rally to highs. The advance has coincided with gains in other sovereign debt while equity markets have had a mostly positive night. The overnight news flow included an upward revision to Germany's Q2 GDP (to 0.3% from 0.2%) and an above-consensus ifo Business Climate Index (88.8; expected 87.2), reflecting some overall improvement in Germany's economy. The U.S. session will feature the 10:00 ET release of July New Home Sales (Briefing.com consensus 620,000; prior 628,000) and August Consumer Confidence (Briefing.com consensus 90.6; prior 90.8) and the U.S. Treasury will sell $69 bln in 2-yr notes at 13:00 ET. Crude oil is falling toward $82/bbl while the U.S. Dollar Index is flat at 99.03.
• Yield Check:
  • 2-yr: -3 bps to 4.21%
  • 3-yr: -3 bps to 4.27%
  • 5-yr: -4 bps to 4.37%
  • 10-yr: -4 bps to 4.66%
  • 30-yr: -4 bps to 5.19%

• News:
  • Japan is reportedly planning to exempt gains from non-core business sales from corporate tax if proceeds are reinvested in acquisitions.
  • Japan is not planning to release crude oil from its national reserve in September or October.
  • Japan's budget for FY27 assumes record interest costs. 
  • In China, Chengdu's local government eased housing rules and lowered the minimum down payment ratio.
  • The Reserve Bank of Australia's latest policy minutes showed readiness to hike if upside risks materialize.
  • German Chancellor Merz said that his cabinet will consider ways to protect domestic industry.
  • British Prime Minister Burnham will reportedly not rule out a tax hike in the Autumn budget.
  • Flight tracking data showed a U.S. military transport plane arriving in Moscow this morning, but a reason for the visit has not been given.
  • Japan's June BoJ Core CPI was up 2.3% yr/yr (last 2.6%). June Leading Index remained at 116.5 (expected 116.4) and Coincident Indicator was up 0.6% m/m (expected 0.3%; last -0.2%).
  • Hong Kong's July trade deficit reached HKD4.9 bln (last deficit of HKD52.0 bln) as imports grew 41.0% m/m (last 45.4) and exports jumped 50.7% m/m (last 53.4%).
  • South Korea's August Consumer Confidence fell to 104.5 from 106.8.
  • Germany's Q2 GDP expanded 0.3% qtr/qtr (expected 0.2%; last 0.4%), growing 1.0% yr/yr (expected 0.9%; last 0.7%). August ifo Business Climate Index rose to 88.8 from 86.7 (expected 87.2). August Current Assessment rose to 88.5 from 86.5 (expected 87.0) and Business Expectations rose to 89.1 from 86.8 (expected 87.5).
  • France's August Consumer Confidence remained at 86 (expected 87).
  • Spain's July PPI was up 9.2% yr/yr (last 7.0%).
• Commodities:
  • WTI Crude: -3.5% to $82.01/bbl
  • Gold: UNCH at $4698.80/ozt
  • Copper: +0.6% to $6.642/lb
• Currencies:
  • EUR/USD: UNCH at 1.1661
  • GBP/USD: UNCH at 1.3633
  • USD/CNH: UNCH at 6.7194
  • USD/JPY: +0.1% to 159.26
• Data out Today:
  • 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