Bond Market Update

Little Changed Despite EU Trade Deal News

U.S. Treasuries are on track for a slightly lower start in the belly while other tenors are set to open closer to their unchanged levels. Treasury futures climbed to highs at the start of the European session before returning to levels seen shortly after the Sunday open. The biggest news of the weekend came from Scotland, where President Trump met with European Commission President von der Leyen, agreeing to a trade deal that will result in a 15% tariff rate on European imports into the U.S., call for $750 bln in energy purchases from the U.S., and a $600 bln investment into the U.S. Separately, the U.S. and China will reportedly extend the current tariff rates for three months to allow more time for negotiations. The U.S. session will not feature any data, but the U.S. Treasury will sell $69 bln in 2-yr notes at 11:30 ET, followed by a $70 bln 5-yr note sale at 13:00 ET. Crude oil is returning to its 50-day moving average (65.92) while the U.S. Dollar Index is up 0.6% at 98.23.

• Yield Check:
  • 2-yr: UNCH at 3.92%
  • 3-yr: +1 bp to 3.87%
  • 5-yr: +1 bp to 3.96%
  • 10-yr: UNCH at 4.39%
  • 30-yr: +1 bp to 4.94%
• News:
  • Officials from Japan and the U.S. reportedly have a differing view on how the investment component of the trade deal with Japan will be utilized.
  • China's Premier Li said that his country is setting up an international AI collaboration group.
  • China's June Industrial Profit was down 1.8% YTD (last -1.1%).
  • Hong Kong's June trade deficit reached HKD58.90 bln (last deficit of HKD27.3 bln) as imports rose 11.1% m/m (last 18.9%) and exports grew 11.9% m/m (last 15.5%).
  • India's June Industrial Production was up 1.5% yr/yr (expected 2.0%; last 1.2%) and June Manufacturing Output was up 3.9% m/m (last 2.6%).
  • U.K.'s July CBI Distributive Trades Survey rose to -34 from -46 (expected -28).
• Commodities:
  • WTI Crude: +1.4% to $66.05/bbl
  • Gold: +0.1% to $3337.80/ozt
  • Copper: UNCH at $5.787/lb
• Currencies:
  • EUR/USD: -0.8% to 1.1650
  • GBP/USD: -0.1% to 1.3426
  • USD/CNH: +0.1% to 7.1764
  • USD/JPY: +0.4% to 148.14
• No Data on Today's Schedule
• Treasury Auctions:
  • 11:30 ET: $69 bln 2-yr Treasury note auction results
  • 13:00 ET: $70 bln 5-yr Treasury note auction results