Bond Market Update

Holding Steady

• U.S. Treasuries finished close to where they settled in yesterday's session. There was some modest selling early today following a sturdy initial jobless claims report that is expected to keep a July rate cut on ice, but there was no follow-through. Yields started to dip in front of today's $22 billion 30-yr bond auction results at 1:00 p.m. ET, and they continued to move lower in its wake. The auction was met with decent demand, and it concluded a week that saw the market absorb $119 billion in new supply without much problem. That fostered a bit of a relief trade that contributed to the recovery effort, which transpired amid a seeming lack of concern for tariff-induced inflation pressures.
• Yield Check:
  • 2-yr: +1 bp to to 3.87%
  • 3-yr: +1 bp to 3.84%
  • 5-yr: +2 bps to 3.94%
  • 10-yr: +1 bp to 4.35%
  • 30-yr: -1 bp to 4.87%

• News:
  • President Trump confirms that Brazil will face 50% tariff in response to Bolsonaro trial and trade imbalance
    • Brazil President Luiz Inácio Lula da Silva says "Therefore, any unilateral tariff increases will be addressed in accordance with Brazil's Economic Reciprocity Law"
  • President Trump confirms 50% copper tariff will begin August 1st
  • Fed Governor Chris Waller (voting FOMC member and possible Fed Chair candidate for 2026) says Fed balance sheet should drop to $5.8 trln, according to Bloomberg
  • San Francisco Fed President Mary Daly (non-voter) expects two rate cuts this year, according to Reuters
  • Indian officials will soon visit U.S. for trade talks (INDA). Bloomberg
  • Vietnam is planning additional penalties for transshipping following an agreement with President Trump. Reuters
  • The Bank of Korea left its policy rate at 2.50%, as expected
  • OPEC sees global oil demand at almost 123 mb/d in 2050
  • Japan reduced its 20-yr JGB auction size to improve demand
  • $22 bln 30-yr bond auction results at 1:00 p.m. ET
  • Germany's June CPI 0.0% m/m, as expected (last 0.1%); 2.0% yr/yr, as expected (last 2.1%)
• Today's Data:
  • Initial jobless claims decreasing by 5,000 for the week ending July 5 to 227,000 (Briefing.com consensus: 245,000). Continuing jobless claims for the week ending June 28 increased by 10,000 to 1.965 million, which is the highest level since November 13, 2021.
    • The key takeaway from the report continues to be that businesses have been slow to let employees go, but that it has become more difficult to find a job after losing one. This dynamic reflects a softening labor market, but not a truly weak labor market.
• Commodities:
  • WTI crude: -2.7% to $66.59/bbl
  • Gold: +0.1% to $3325.60/ozt
  • Copper: +1.6% to $5.59/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1693
  • GBP/USD: -0.1% to 1.3575
  • USD/CNH: flat at 7.1786
  • USD/JPY: -0.1% to 146.24
• The Day Ahead:
  • 14:00 ET: June Treasury Budget (Briefing.com consensus: -$257.5B; prior -$316.0B)