Bond Market Update

Modest Selling Pressure

• U.S. Treasuries saw some modest selling pressure today, most of which occurred ahead of the cash session. The cash session was dictated by little change across the curve despite a relatively weak 3-yr note auction and talk of more tariffs (and tariff letters) coming soon. A New York Fed survey showing a downtick in short-term inflation expectations, though, offered a measure of support in conjunction with a prevailing belief that better trade deals will ultimately be announced and that tariffs for major trading partners will be less onerous than feared. Countries have until August 1, however, to make that happen. President Trump said today that there will be no extensions granted after August 1.
• Yield Check:
  • 2-yr: +2 bps to 3.91%
  • 3-yr: +2 bps to 3.87%
  • 5-yr: +3 bps to 3.99%
  • 10-yr: +3 bps to 4.42%
  • 30-yr: +2 bps to 4.94%

• 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 said there will be no extensions past August 1 for countries that got letters yesterday and for countries that will receive letters today, tomorrow, and for the next short period of time
  • 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"
  • Commerce Secretary Howard Lutnick in CNBC interview says the EU has made "significant real offers" to open up markets; 15-20 additional tariff letters will go out over the next two days
  • President Trump at cabinet meeting repeats that he will soon impose 200% tariffs on pharma imports; says pharma companies will given a year to 18 months to move production to U.S. or face tariff
  • President Trump at cabinet meeting says he will soon announce tariffs on copper at 50%
  • South Korea plans to fix regulations to address demands from the Trump administration following tariff threats, according to Bloomberg
  • China threatens to retaliate against countries that strike deals with U.S., according to Reuters
  • NY Fed says short-term inflation expectations tick down, household financial expectations improve
    • Median inflation expectations decreased by 0.2 percentage point to 3.0% at the one-year-ahead horizon. They were unchanged at the three-year- (3.0%) and five-year-ahead (2.6%) horizons in June
  • 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%)
• Today's Data:
  • June NFIB Small Business Optimism Index held fairly steady at 98.6 (prior 98.8)
  • The high yield of 3.891% at the $58 bln 3-yr note auction tailed the when-issued yield of 3.887% on weak demand from indirect bidders
  • May Consumer Credit $5.1 bln following a downwardly revised $16.9 bln (from $17.9 bln) in April. The increase was driven entirely by nonrevolving credit, which was up $8.6 bln.
• Commodities:
  • WTI crude: +0.5% to $68.30/bbl
  • Gold: -0.7% to $3317.40/ozt
  • Copper: +11.2% to $5.58/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1728
  • GBP/USD: -0.1% to 1.3596
  • USD/CNH: flat at 7.1809
  • USD/JPY: +0.4% to 146.63
• The Day Ahead:
  • 07:00 ET: MBA Mortgage Applications Index (prior 2.7%)
  • 10:00 ET: May Wholesale Inventories (Briefing.com consensus: -0.3%; prior 0.2%)
  • 10:30 ET: EIA Crude Oil Inventories (prior +3.845M)
  • 13:00 ET: $39 bln 10-yr note reopening
  • 14:00 ET: FOMC Minutes for June 17-18 meeting