Bond Market Update

Belly ahead

• U.S. Treasuries are on track for a modestly higher start with the belly expected to show early strength after yesterday's slightly lower finish. Treasury futures climbed in early evening action, defending their slim gains as the night went on. Reported shortly after yesterday's close, May long-term foreign capital inflows into the U.S. exceeded long-term purchases of foreign securities by U.S. citizens by $259.4 bln, a near record amount, second only to a $262.4 bln total that was reached in March 2021. In tariff news, the EU is proposing a removal of a 10% import duty on U.S. vehicles if President Trump lowers the 25% tariff on EU auto imports below 20%. Meanwhile, Treasury Secretary Bessent is meeting with Japanese officials at this weekend's World Exposition in Osaka. Today's economic data will include the 8:30 ET release of June Housing Starts (Briefing.com consensus 1.300 mln; prior 1.256 mln) and Building Permits (Briefing.com consensus 1.383 mln; prior 1.393 mln), followed by the preliminary July reading of the University of Michigan's Consumer Sentiment Index (Briefing.com consensus 61.5; prior 60.7) at 10:00 ET. Crude oil is on the rise while the U.S. Dollar Index is down 0.4% at 98.31.
• Yield Check:
  • 2-yr: -4 bps to 3.88%
  • 3-yr: -4 bps to 3.85%
  • 5-yr: -5 bps to 3.96%
  • 10-yr: -3 bps to 4.43%
  • 30-yr: -2 bps to 4.99%

• News:
  • Japan is headed for a weekend election that could result in the ruling LDP losing its majority, which would force the party to form a coalition government with parties that are looking to cut the consumption tax.
  • Japan's Prime Minister Ishiba met with U.S. Treasury Secretary Bessent today.
  • There is a growing likelihood of a rate cut from the Reserve Bank of Australia after yesterday's jobs report for June showed a rising unemployment rate.
  • Swedish appliance maker Electrolux reported strong results thanks in part to price hikes in the U.S. due to tariffs, but the company noted that some of its competitors are choosing to absorb the cost of higher tariffs.
  • Japan's June National CPI was up 0.1% m/m (last 0.3%), rising 3.3% yr/yr (last 3.5%). June National Core CPI was up 3.3% yr/yr (expected 3.4%; last 3.7%).
  • New Zealand's June Credit Card Spending was up 0.9% yr/yr (last 2.0%).
  • Eurozone's May Current Account surplus reached EUR32.3 bln (expected surplus of EUR34.8 bln; last surplus of EUR18.6 bln). May Construction Output was down 1.68% m/m (last 4.29%).
  • Germany's June PPI was up 0.1% m/m, as expected (last -0.2%) and down 1.3% yr/yr, as expected (last -1.2%).
• Commodities:
  • WTI Crude: +1.0% to $66.91/bbl
  • Gold: +0.5% to $3363.20/ozt
  • Copper: +1.1% to $5.574/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1640
  • GBP/USD: +0.3% to 1.3455
  • USD/CNH: UNCH at 7.1805
  • USD/JPY: UNCH at 148.51
• Data out Today:
  • 8:30 ET: June Housing Starts (Briefing.com consensus 1.300 mln; prior 1.256 mln) and Building Permits (Briefing.com consensus 1.383 mln; prior 1.393 mln)
  • 10:00 ET: Preliminary July University of Michigan Consumer Sentiment (Briefing.com consensus 61.5; prior 60.7)