Bond Market Update

Long Bond Recovers Early Loss

• U.S. Treasuries finished Thursday with losses in most tenors, though the long end outperformed, allowing the long bond to reclaim its opening loss by the close. Treasuries started the day with an extension of their losses from Wednesday, but longer tenors climbed off their lows after today's second batch of data showed that flash July S&P Global U.S. Manufacturing PMI (49.5; prior 52.9) returned to contraction while activity in the services sector accelerated with the flash July S&P Global U.S. Services PMI hitting 55.2, up from 52.9 in June. The rebound returned the 10-yr note to its starting level with its yield dipping back below its 50-day moving average (4.410%) while the long bond reclaimed its entire opening loss. Shorter tenors underperformed, leaving the 2-yr note near its morning low. Crude oil climbed back above its 50-day moving average (65.83) while the U.S. Dollar Index rose 0.2% to 97.37.
• Yield Check:
  • 2-yr: +4 bps to 3.92%
  • 3-yr: +4 bps to 3.87%
  • 5-yr: +4 bps to 3.97%
  • 10-yr: +2 bps to 4.41%
  • 30-yr: UNCH at 4.95%

• News:
  • South Korea is reportedly looking to invest $100 bln in the U.S. as part of a trade deal with the Trump administration.
  • Expectations for an October rate hike from the Bank of Japan rose significantly after yesterday's announcement of Japan's trade deal with the U.S.
  • Deutsche Bank and BNP Paribas reported stronger-than-expected results for Q2.
  • Japan's flash July Manufacturing PMI hit 48.8 (expected 50.2; last 50.1) and flash July Services PMI hit 53.5 (last 51.7).
  • South Korea's Q2 GDP expanded 0.6% qtr/qtr (expected 0.5%; last -0.2%), growing 0.5% yr/yr (expected 0.4%; last 0.0%).
  • India's flash July Manufacturing PMI hit 59.2 (last 58.4) and flash July Services PMI hit 59.8 (last 60.4).
  • Australia's flash July Manufacturing PMI hit 51.6 (last 50.6) and flash July Services PMI hit 53.5 (last 51.7).
  • Eurozone's flash July Manufacturing PMI hit 49.8 (expected 49.7; last 49.5) and flash July Services PMI hit 51.2 (expected 50.6; last 50.5).
  • Germany's August GfK Consumer Climate fell to -21.5 from -20.3 (expected -19.4). Flash July Manufacturing PMI hit 49.2 (expected 49.4; last 49.0) and flash July Services PMI hit 50.1 (expected 50.0; last 49.7).
  • U.K.'s flash July Manufacturing PMI hit 48.2 (expected 47.9; last 47.7) and flash July Services PMI hit 51.2 (expected 52.8; last 52.8). July CBI Industrial Trends Orders rose to -30 from -33 (expected -27).
  • France's July Business Survey fell to 96 from 97, as expected. Flash July Manufacturing PMI hit 48.4 (expected 48.5; last 48.1) and flash July Services PMI hit 49.7, as expected (last 49.6).
  • Spain's June PPI was up 0.8% yr/yr (last 0.0%). Q2 Unemployment Rate fell to 10.3% from 11.4% (expected 10.6%).
• Today's Data:
  • New home sales increased 0.6% month-over-month in June to a seasonally adjusted annual rate of 627,000 units (Briefing.com consensus 650,000) from an unrevised 623,000 in May. This leaves the pace of sales near the lowest level of the year, comparable to what was seen in October. On a year-over-year basis, new home sales were down 6.6%.
    • The key takeaway from the report is that is that the pace of sales remained near the lowest level of the year, as sharp decreases in sales in the Northeast and the West masked gains in the Midwest and the South. There was pressure on the median selling price as homes priced between $300,000 and $399,000 accounted for 35% of all sales, up from 25% in May.
  • Initial jobless claims for the week ending July 19 decreased by 4,000 to a lowly 217,000 (Briefing.com consensus: 225,000). Continuing jobless claims for the week ending July 12 increased by 4,000 to 1.955 million.
    • The key takeaway from the report is still the same. The low level of initial jobless claims connotes a relatively solid labor market; however, the elevated level of continuing jobless claims connotes some added difficulty in finding a new job in the event one gets laid off by their employer.
  • The S&P Global U.S. Manufacturing PMI hit 49.5 in the preliminary reading for July, down from 52.9 in June.
  • The S&P Global U.S. Services PMI hit 55.2 in the preliminary reading for July, up from 52.9 in June.
  • Weekly natural gas inventories increased by 23 bcf after increasing by 46 bcf a week ago.
• Commodities:
  • WTI crude: +1.3% to $66.06/bbl
  • Gold: -0.7% to $3374.40/ozt
  • Copper: -0.3% to $5.80/lb
• Currencies:
  • EUR/USD: UNCH at 1.1764
  • GBP/USD: -0.5% to 1.3513
  • USD/CNH: UNCH at 7.1594
  • USD/JPY: +0.4% to 146.95
• The Day Ahead:
  • 8:30 ET: June Durable Orders (Briefing.com consensus -11.0%; prior 16.4%) and Durable Orders ex-transport (Briefing.com consensus -0.2%; prior 0.5%)

Long End Remains Ahead

• U.S. Treasuries have continued their bounce off morning lows with the long bond seeing a continuation of its relative strength. That strength has pressured the 30-yr yield back toward its 50-day moving average (4.925%) while the 10-yr yield is back below the 50-day moving average of its own (4.410%) after opening weakness drove it to a one-week high just shy of 4.450%. Shorter tenors have also risen off their lows, but the 2-yr yield is still firmly higher for the day.
• Yield Check:
  • 2-yr: +4 bps to 3.92%
  • 3-yr: +4 bps to 3.87%
  • 5-yr: +3 bps to 3.96%
  • 10-yr: +1 bp to 4.40%
  • 30-yr: -1 bp to 4.94%

Long End Resists Early Pressure

• Longer-dated Treasuries are back near their starting levels after bouncing off their early lows. The market started the day with losses across the curve that were extended during the first hour of action, which included the release of an unexpected decrease in weekly Initial Claims (217,000; Briefing.com consensus 225,000; prior 221,000). The early selling lifted the 10-yr yield back above its 50-day moving average (4.410%) to a one-week high, but the recent bounce has returned the benchmark yield to its 50-day average. The rebound accelerated after the flash July S&P Global U.S. Manufacturing PMI (49.5; prior 52.9) showed a return to contraction while activity in the services sector accelerated with the flash July S&P Global U.S. Services PMI hitting 55.2, up from 52.9 in June. The rebound has been paced by the long bond while the 2-yr note remains not far above its early low.
• Yield Check:
  • 2-yr: +4 bps to 3.92%
  • 3-yr: +5 bps to 3.88%
  • 5-yr: +5 bps to 3.98%
  • 10-yr: +3 bps to 4.42%
  • 30-yr: +1 bp to 4.96%

Data Recon

• New home sales increased 0.6% month-over-month in June to a seasonally adjusted annual rate of 627,000 units (Briefing.com consensus 650,000) from an unrevised 623,000 in May. This leaves the pace of sales near the lowest level of the year, comparable to what was seen in October. On a year-over-year basis, new home sales were down 6.6%.
  • The key takeaway from the report is that the pace of sales remained near the lowest level of the year with sharp decreases in sales in the Northeast and the West masking gains in the Midwest and the South. There was pressure on the median selling price, as homes priced between $300,000 and $399,000 accounted for 35% of all sales (2025 high), up from 25% in May.
• Yield Check:
  • 2-yr: +4 bps to 3.92%
  • 3-yr: +4 bps to 3.87%
  • 5-yr: +4 bps to 3.97%
  • 10-yr: +2 bps to 4.41%
  • 30-yr: +1 bp to 4.96%

Data Recon

• Initial jobless claims for the week ending July 19 decreased by 4,000 to a lowly 217,000 (Briefing.com consensus: 225,000). Continuing jobless claims for the week ending July 12 increased by 4,000 to 1.955 million.
  • The key takeaway from the report is still the same. The low level of initial jobless claims connotes a relatively solid labor market; however, the elevated level of continuing jobless claims connotes some added difficulty in finding a new job in the event one gets laid off by their employer.
• Yield Check:
  • 2-yr: +4 bps to 3.92%
  • 3-yr: +5 bps to 3.88%
  • 5-yr: +5 bps to 3.98%
  • 10-yr: +4 bps to 4.43%
  • 30-yr: +4 bps to 4.99%