Bond Market Update

Short End Ahead

• U.S. Treasuries are on track to begin Friday with modest gains in shorter tenors after a daylong Thursday retreat that lifted yields to their highest levels in at least two weeks. Overnight action unfolded inside a narrow range with Treasury futures inching higher during the Asian session, followed by a slow dip from highs over the past few hours. There was some lingering optimism ahead of this weekend's trade talks between officials from China and the United States and speculation that the tariff rate on imports from China could be reduced. The economic data flow was on the light side with China reporting a slightly smaller than expected trade surplus for April with export growth to Asia-Pacific and Europe offsetting a fall in shipments to the U.S. The U.S. session, however, will be free of data. Crude oil is building on yesterday's advance while the U.S. Dollar Index is down 0.2% at 100.45.
• Yield Check:
  • 2-yr: -4 bps to 3.85%
  • 3-yr: -4 bps to 3.84%
  • 5-yr: -2 bps to 3.97%
  • 10-yr: +1 bp to 4.38%
  • 30-yr: +2 bps to 4.86%

• News:
  • Westpac now expects the Reserve Bank of New Zealand to make two rate cuts by July. 
  • Bank of England Governor Andrew Bailey expressed hope that the U.S.-U.K. accord could serve as a model for improving trade relations with the EU.
  • China's April trade surplus $96.18 bln (expected surplus of $97.00 bln; last surplus of $102.64 bln). April Imports -0.2% yr/yr (expected -5.9%; last -4.3%) and Exports 8.1% yr/yr (expected 1.9%; last 12.4%).
  • Japan's March Household Spending was up 0.4% m/m (expected -0.5%; last 3.5%), rising 2.1% yr/yr (expected 0.2%; last -0.5%). March Overall Wage Income was up 2.1% yr/yr (expected 2.4%; last 2.7%) and March Overtime Pay was down 1.1% yr/yr (last 2.4%). March Leading Index decreased to 107.7 from 107.9 (expected 107.4) and Coincident Indicator was down 1.3% m/m (last 0.9%).
  • South Korea's May Current Account surplus reached $9.14 bln (last surplus of $7.18 bln).
  • Italy's March Industrial Production was up 0.1% m/m (expected 0.4%; last -0.9%) but down 1.8% yr/yr (last -2.6%).
  • Swiss Q2 SECO Consumer Climate fell to -39 from -21 (expected -34).
• Commodities:
  • WTI Crude: +1.9% to $61.06/bbl
  • Gold: +0.9% to $3336.10/ozt
  • Copper: +0.1% to $4.607/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1253
  • GBP/USD: +0.2% to 1.3275
  • USD/CNH: UNCH at 7.2396
  • USD/JPY: -0.5% to 145.14
• No Data on Today's Schedule