Bond Market Update

Eye on CPI

• U.S. Treasuries are mixed in front of the June CPI release at 8:30 a.m. ET, with the front end underperforming the back end in a curve-flattening trade. Overnight action featured a trove of economic releases out of China that included stronger-than-expected Q2 GDP and June retail sales, fixed asset investment, and industrial production data that was mixed relative to expectations. The GDP print reportedly tempered the prospect of China providing additional fiscal stimulus. Elsewhere, eurozone industrial production was stronger than expected in May. The U.S. Dollar Index is flat at 98.09.
• Yield Check:
  • 2-yr: +2 bps to 3.92%
  • 3-yr: +2 bps to 3.89%
  • 5-yr: +1 bp to 3.99%
  • 10-yr: -1 bp to 4.42%
  • 30-yr: -1 bp to 4.96%

• News:
  • EU preparing countermeasures to respond to tariffs which will target cars and planes, according to Politico
  • Senate Majority Leader John Thune says the Senate will hold off on advancing Russia sanctions legislation after President Trump promised to use his own authority to impose 100% secondary tariffs on Russia in 50 days if Russia doesn't stop war in Ukraine, according to Politico
  • JGB yields continued their ascent, with the 10-yr reaching its highest levels (1.60%) since October 2008. The 20-yr and 30-yr yields moved to multi-year highs, as market participants expressed their concerns about the LDP possibly losing its ruling coalition in the upper house and ceding such control to opposition parties pushing populist agendas that would lead to more bond issuance.
  • NVIDIA is rallying in pre-market trading after getting approval to resume sales of its H20 AI chip to China
  • France's prime minister is advancing a deficit reduction plan that includes tax increases and EUR40 bln of spending cuts that some suggest could spark a government collapse, according to Bloomberg
  • China's Q2 GDP 1.1% qtr/qtr (expected 0.9%; last 1.2%) and 5.3% YTD (expected 5.1%; last 5.4%); June Industrial Production 6.8% yr/yr (expected 5.6%; last 5.8%); June Retail Sales 4.8% yr/yr (expected 5.2%; last 6.4%); June Fixed Asset Investment 2.8% yr/yr (expected 3.6%; last 3.7%); June Unemployment Rate 5.0% (expected 5.0%; last 5.0%); June House Prices -3.2% yr/yr (last -3.5%)
  • Eurozone's May Industrial Production 1.7% m/m (expected 1.1%; last -2.2%) and 3.7% yr/yr (expected 2.9%; last 0.2%); July ZEW Economic Sentiment 36.1 (expected 37.8; last 35.3)
  • Germany's July ZEW Economic Sentiment 52.7 (expected 50.8; last 47.5)
• Commodities:
  • WTI crude: -0.3% to $66.76/bbl
  • Gold: +0.2% to $3367.10/ozt
  • Copper: -0.1% to $5.55/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1669
  • GBP/USD: +0.1% to 1.3444
  • USD/CNH: +0.1% to 7.1772
  • USD/JPY: +0.2% to 147.93
• The Day Ahead:
  • 08:30 ET: June CPI (Briefing.com consensus: 0.2%; prior 0.1%) and Core CPI (Briefing.com consensus: 0.3%; prior 0.1%)
  • 08:30 ET: July Empire State Manufacturing (Briefing.com consensus -11.6; prior -16.0)