Bond Market Update

Long End Dips

• U.S. Treasuries are on track for a mixed, but largely flat, start ahead of the release of a full slate of economic data throughout the morning, starting with July Retail Sales (Briefing.com consensus 0.3%; prior 0.0%) at 8:30 ET. Treasury futures spent the night in a sideways range with shorter tenors showing slight relative strength after underperforming yesterday while the long bond is on course for a slightly lower start. The overnight session saw the release of multiple economic reports, including Japan's above-consensus flash Q2 GDP (0.8%; expected 0.6%), better-than-expected July employment growth in Australia (58,200; expected 20,200), and in-line flash Q2 growth in the U.K. (0.6%). That said, overnight trading volume was reduced by holiday closures in South Korea, India, and Italy. Crude oil is bouncing after a couple days of losses while the U.S. Dollar Index is little changed at 102.57.
• Yield Check:
  • 2-yr: UNCH at 3.95%
  • 3-yr: UNCH at 3.76%
  • 5-yr: +1 bp to 3.68%
  • 10-yr: +2 bps to 3.84%
  • 30-yr: +2 bps to 4.13%

• News:
  • China Securities Journal warned about "additional volatility" in the bond market as the government tries to discourage strong demand for fixed income.
  • China Baowu Steel Group warned that the Chinese steel industry is facing a bigger crisis than what was seen in 2008 and 2015.
  • Thailand's prime minister was dismissed after being found guilty of an ethics violation.
  • Norges Bank kept its policy rate at 4.50% and released a somewhat dovish Statement.
  • China's July Industrial Production was up 5.1% yr/yr (expected 5.2%; last 5.3%), July Retail Sales grew 2.7% yr/yr (expected 2.6%; last 2.0%), July Fixed Asset Investment increased 3.6% yr/yr (expected 3.9%; last 3.9%), and July Unemployment Rate rose to 5.2% from 5.0% (expected 5.1%). July House Prices were down 4.9% yr/yr (last -4.5%).
  • Japan's flash Q2 GDP expanded 0.8% qtr/qtr (expected 0.6%; last -0.6%), growing 3.1% yr/yr (expected 2.1%; last -2.3%). Q2 GDP Price Index was up 3.0% (expected 2.6%; last 3.4%). June Industrial Production was down 4.2% m/m (expected -3.6%; last 3.6%) and Capacity Utilization was down 3.1% m/m (last 4.1%).
  • Australia's July Employment increased by 58.200 (expected 20,200; last 52,300) and full employment increased by 60,500 (last 45,200). July Unemployment Rate rose to 4.2% from 4.1% (expected 4.1%) and Participation Rate rose to 67.1% from 66.9% (expected 66.9%).
  • New Zealand's July Electronic Card Retail Sales were down 0.1% m/m (last -0.7%), falling 4.9% yr/yr (last -4.9%). July FPI was up 0.4% m/m (last 1.0%).
  • U.K.'s flash Q2 GDP grew 0.6% qtr/qtr, as expected (last 0.7%), expanding 0.9% yr/yr, as expected (last 0.3%). Q2 Business Investment was down 0.1% qtr/qtr (expected 0.4%; last 0.5%), falling 1.1% yr/yr (last -1.0%). June Construction Output rose 0.5% m/m (expected -0.3%; last 1.7%) but was down 1.7% yr/yr (expected -1.9%; last 0.6%). June Industrial Production rose 0.8% m/m (expected 0.1%; last 0.3%), falling 1.4% yr/yr (expected -2.1%; last 0.4%). June Manufacturing Production was up 1.1% m/m (expected 0.2%; last 0.3%) but down 1.5% yr/yr (expected -2.4%; last 0.4%). June trade deficit reached GBP18.89 bln (expected deficit of GBP16.00 bln; last deficit of GBP18.58 bln). Q2 Labor Productivity increased by 0.1% qtr/qr (expected -0.3%; last -0.2%).
  • Swiss July PPI was unchanged m/m (expected 0.2%; last 0.0%), falling 1.7% yr/yr, as expected (last -1.9%).
• Commodities:
  • WTI Crude: +1.1% to $77.80/bbl
  • Gold: +0.8% to $2498.60/ozt
  • Copper: +1.9% to $4.116/lb
• Currencies:
  • EUR/USD: UNCH at 1.1013
  • GBP/USD: +0.3% to 1.2862
  • USD/CNH: +0.2% to 7.1587
  • USD/JPY: UNCH at 147.22
• Data out Today:
  • 8:30 ET: July Retail Sales (Briefing.com consensus 0.3%; prior 0.0%), Retail Sales ex-auto (Briefing.com consensus 0.2%; prior 0.4%), weekly Initial Claims (Briefing.com consensus 232,000; prior 233,000), Continuing Claims (prior 1.875 mln), July Import Prices (prior 0.0%), Import Prices ex-oil (prior 0.2%), Export Prices (prior -0.5%), Export Prices ex-agriculture (prior -0.6%), and Empire State Manufacturing Survey (prior -6.6)
  • 9:15 ET: July Industrial Production (Briefing.com consensus 0.1%; prior 0.6%) and Capacity Utilization (Briefing.com consensus 78.6%; prior 78.8%)
  • 10:00 ET: June Business Inventories (Briefing.com consensus 0.2%; prior 0.5%) and August NAHB Housing Market Index (Briefing.com consensus 43; prior 42)
  • 10:30 ET: Weekly natural gas inventories (prior +21 bcf)
  • 16:00 ET: June Net Long-Term TIC Flows (prior -$54.6 bln)