Bond Market Update

Still Weak

• U.S. Treasuries saw some weakness yesterday, and that weakness persisted in the overnight trade. Yields are higher across the curve, albeit modestly, as market participants digest the possibility of higher tariff rates starting August 1 for some countries, leading to some sticky inflation. Still, there is some underlying hope, with the deadline being extended to August 1 (and possibly later than that), that better deals can be worked out and reciprocal tariffs end up being less onerous. The market is also readying itself for more supply this week, beginning with today's $58 billion 3-yr note auction. Results will be released at 1:00 p.m. ET.
• Yield Check:
  • 2-yr: +2 bps to 3.91%
  • 3-yr: +2 bps to 3.87%
  • 5-yr: +2 bps to 3.98%
  • 10-yr: +3 bps to 4.42%
  • 30-yr: +3 bps to 4.95%

• News:
  • White House confirms tariff rates effective August 1: Japan & South Korea at 25%; South Africa at 30%; Indonesia at 32%; Bangladesh at 35%; Thailand & Cambodia at 36%; President Trump extends tariff deadline to August 1 from July 9 and says he may send more letters to trading partners in the coming days and weeks
  • President Trump signed an executive order "to eliminate subsidies for unreliable green energy sources like wind and solar in furtherance of the One Big Beautiful Bill Act"
  • The Trump administration offered the EU a trade deal that would keep tariffs at the baseline level of 10%, according to Politico
  • South Korea plans to fix regulations to address demands from the Trump administration following tariff threats, according to Bloomberg
  • President Trump says the August 1 tariff deadline is "not 100% firm," and he is open to negotiations, according to Bloomberg
  • China threatens to retaliate against countries that strike deals with U.S., according to Reuters
  • The RBA left its cash rate unchanged at 3.85% in a 6-3 vote, surprising a market that expected a 25 basis point cut. The decision was predicated on a desire to wait for more data, yet the RBA remains inclined to cut rates further.
  • Germany's May exports -1.4% (expected -0.2%; last -1.6%) and imports -3.8% (expected -0.9%; last -2.2%)
• Commodities:
  • WTI crude: -0.2% to $67.80/bbl
  • Gold: -0.2% to $3334.70/ozt
  • Copper: +0.7% to $5.06/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1716
  • GBP/USD: -0.2% to 1.3574
  • USD/CNH: flat at 7.1794
  • USD/JPY: +0.4% to 146.56
• The Day Ahead:
  • 15:00 ET: May Consumer Credit (Briefing.com consensus: $12.2B; prior $17.9B)