Bond Market Update

 Long End Ahead

• U.S. Treasuries are on track for a higher start in longer tenors while the front end is set to start closer to yesterday's closing levels. Treasury futures held their ground after yesterday's cash close, inching higher during the early portion of the Asian session, which saw gains in equity markets while JGBs and other sovereign debt also advanced. The overnight batch of data featured service sector surveys from major economies, headlined by a deceleration in China's RatingDog Services PMI to 50.4 from 54.1, indicating a near standstill in growth. Meanwhile, the eurozone's Services PMI accelerated to 52.0 from 50.0, reflecting modest growth. The services sector will remain in focus during the U.S. session with the July ISM Non-Manufacturing Index (Briefing.com consensus 54.7%; prior 54.0%) set to be released at 10:00 ET. The market will also receive the ADP Employment Change report for July (Briefing.com consensus 75,000; prior 98,000) at 8:15 ET, ahead of Friday's release of the Employment Situation report from the BLS. Crude oil is back above $76/bbl while the U.S. Dollar Index is down 0.2% at 99.70.
• Yield Check:
  • 2-yr: UNCH at 4.20%
  • 3-yr: UNCH at 4.25%
  • 5-yr: UNCH at 4.33%
  • 10-yr: -2 bps to 4.61%
  • 30-yr: -2 bps to 5.17%

• News:
  • The Reserve Bank of India left its policy rate at 5.25%, as expected, noting that core inflation remains benign.
  • The U.K. is planning to provide about GBP9 bln in infrastructure support for housing and businesses.
  • Italy's Economy Minister Giorgetti said that his country will use extra deficit allowances for energy and defense spending.
  • China's July RatingDog Services PMI hit 50.4 (expected 53.7; last 54.1).
  • Japan's June Overall Wage Income was up 3.4% yr/yr, as expected (last 3.3%) and Overtime Pay rose 2.8% yr/yr (last 2.8%). July Services PMI hit 51.2 (expected 51.9; last 52.2).
  • Hong Kong's July Manufacturing PMI hit 51.0 (last 52.0).
  • Australia's July AIG Manufacturing Index hit -19.6 (last -16.8) and AIG Construction Index hit -40.6 (last -38.1). July Services PMI hit 53.6 (expected 53.0; last 50.5).
  • New Zealand's Q2 Labor Cost Index was up 0.7% qtr/qtr (expected 0.6%; last 0.5%), rising 2.1% yr/yr (last 2.0%). Q2 Employment increased by 0.5% qtr/qtr (expected 0.1%; last 0.2%), Q2 Unemployment Rate rose to 5.6% from 5.4% (expected 5.4%) and Participation Rate rose to 70.7% from 70.4%.
  • India's July Services PMI hit 53.3 (expected 53.1; last 57.4).
  • Singapore's June Retail Sales rose 1.0% m/m (last -2.2%), increasing 4.0% yr/yr (last 2.9%).
  • Eurozone's July Services PMI hit 52.0 (expected 51.9; last 50.0). July PPI was down 0.3% m/m (expected -0.2%; last 0.2%) but up 4.6% yr/yr, as expected (last 5.9%).
  • Germany's July Services PMI hit 49.8 (expected 49.6; last 48.6).
  • U.K.'s July Services PMI hit 52.1 (expected 51.8; last 48.8).
  • France's July Services PMI hit 49.6 (expected 49.8; last 46.8).
  • Italy's July Services PMI hit 52.5 (expected 51.0; last 50.2).
  • Spain's July Services PMI hit 53.8 (expected 54.9; last 54.2).
• Commodities:
  • WTI Crude: +0.3% to $75.98/bbl
  • Gold: +2.2% to $4244.00/ozt
  • Copper: +0.1% to $6.65/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1550
  • GBP/USD: +0.2% to 1.3479
  • USD/CNH: UNCH at 6.7485
  • USD/JPY: -0.1% to 157.58
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -2.9%; prior -6.4%)
  • 8:15 ET: July ADP Employment Change (Briefing.com consensus 75,000; prior 98,000)
  • 9:45 ET: Final July S&P Global U.S. Services PMI (prior 53.6)
  • 10:00 ET: July ISM Non-Manufacturing Index (Briefing.com consensus 54.7%; prior 54.0%)
  • 10:30 ET: Weekly crude oil inventories (prior -7.17 mln)