Bond Market Update

Slipping On Oil

• U.S. Treasuries recorded slim losses on Thursday after a sideways session concluded with a late slip to lows alongside an uptick in the price of oil. Treasuries spent the bulk of the session near their flat lines after a night that was quiet in terms of global news and economic developments. The Bank of Korea announced a rate hike, but the move was not surprising. The biggest story of the night was last evening's release of another impressive quarterly report from NVIDIA (NVDA), which was coupled with strong guidance and clear signs of a continued aggressive push to build out AI infrastructure. Treasuries spent morning trade in a sideways range with slight moves to either side being countered quickly. The market remained near morning lows just as the U.S. Treasury completed this week's note auction slate with a good $44 bln 7-yr note offering. The narrow trading range gave way to a late slip to fresh lows, which coincided with a quick rally in oil that saw WTI crude rise by $2/bbl alongside a report from Axios that the Trump administration is preparing a deal with Venezuela's interim government to take a stake in the country's oil resources. The late dip caused Treasuries to finish lower for the second consecutive day, but all the intraday (in)action unfolded in a narrow range with the 10-yr yield bouncing inside a three-basis point range. Crude oil climbed to the midpoint of this week's range while the U.S. Dollar Index spent the day near its unchanged level at 99.16, which also marks its 200-day moving average. Looking ahead to tomorrow, Fed Chairman Warsh will deliver the keynote address from the Jackson Hole Symposium at 10:00 ET.
• Yield Check:
  • 2-yr: +1 bp to 4.23%
  • 3-yr: +1 bp to 4.30%
  • 5-yr: +2 bps to 4.40%
  • 10-yr: +1 bp to 4.67%
  • 30-yr: +1 bp to 5.19%

• News:
  • President Trump is expected to meet with refiners and fuel retailers next week, according to Reuters.
  • The Bank of Korea raised its policy rate by 25 basis points to 3.00%, as expected. A handful of policymakers expect two more hikes, but the pace of increases is likely to slow.
  • Bank of Japan Deputy Governor Himino called for timely rate hikes but did not explicitly state that he will vote in favor of an increase in September.
  • Fitch is scheduled to release a review of France's sovereign rating tomorrow.
  • China's July Industrial Profit was up 17.6% YTD (last 18.7%).
  • Australia's Q2 Building Capital Expenditure was up 2.1% qtr/qtr (last -3.3%), Q2 Private New Capital Expenditure fell 3.6% qtr/qtr (expected 0.8%; last 6.9%), and Q2 Plant/Machinery Capital Expenditure fell 8.9% qtr/qtr (last 18.4%).
  • Eurozone's July Private Sector Loans were up 3.1% yr/yr (expected 2.9%; last 3.0%) and July Loans to Nonfinancials rose 4.4% yr/yr (last 4.0%).
  • Germany's September GfK Consumer Climate rose to -26.6 from -29.4 (expected -29.5).
  • France's July PPI was up 1.1% m/m (last -0.4%), rising 3.4% yr/yr (last 2.8%). July jobseeker total increased to 3.143 mln from 3.122 mln.
  • Swiss Q2 Employment Level increased to 5.698 mln from 5.537 mln.
• Today's Data:
  • Initial jobless claims for the week ending August 21 decreased by 4,000 to 203,000 (Briefing.com consensus 210,000) from last week's revised total of 207,000 (from 206,000). Continuing jobless claims for the week ending August 15 decreased by 18,000 to 1.778 million from last week's revised total of 1.796 million (from 1.799 million).
    • The key takeaway from the report is that initial claims continue hovering just above the 200,000 mark, showing little change in overall layoff activity while continuing claims are just above their lowest level of the year.
  • The advance goods trade deficit widened to $118.80 bln in July from $101.4 bln in June.
  • Advance Retail Inventories were up 0.7% in July after no change in June.
  • Advance Wholesale Inventories rose 1.3% in July after increasing 0.3% in June.
  • Weekly natural gas inventories increased by 15 bcf after increasing by 16 bcf a week ago.
  • $44 bln 7-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.512% (4.053%).
    • Bid-to-cover: 2.50 (2.48).
    • Indirect bid: 60.8% (70.1%).
    • Direct bid: 27.0% (16.9%).
• Commodities:
  • WTI crude: +1.7% to $83.61/bbl
  • Gold: +0.4% to $4664.30/ozt
  • Copper: +1.4% to $6.69/lb
• Currencies:
  • EUR/USD: UNCH at 1.1650
  • GBP/USD: UNCH at 1.3590
  • USD/CNH: UNCH at 6.7195
  • USD/JPY: +0.1% to 159.42
• The Day Ahead:
  • 9:45 ET: August Chicago PMI (Briefing.com consensus 57.0; prior 57.6)
  • 10:00 ET: Final August University of Michigan Consumer Sentiment (Briefing.com consensus 51.0; prior 51.0)