Bond Market Update

Higher Start Ahead

• U.S. Treasuries are on track for a higher start with longer tenors set to show early strength after underperforming yesterday. Treasury futures saw essentially no movement during the early part of the night, which featured the release of weak July social financing data from China. However, that did not stop China's Shanghai Composite (+0.5%) from reaching its best level since December 2021. Treasury futures climbed once the focus shifted to action in Europe, reaching their best levels of the morning in recent trade. The market will not receive any top-tier data today, but July PPI (Briefing.com consensus 0.2%; prior 0.0%) and Core PPI (Briefing.com consensus 0.2%; prior 0.0%) will be released tomorrow morning. Crude oil is adding to yesterday's loss while the U.S. Dollar Index is down 0.4% at 97.73.
• Yield Check:
  • 2-yr: -3 bps to 3.70%
  • 3-yr: -4 bps to 3.67%
  • 5-yr: -3 bps to 3.79%
  • 10-yr: -3 bps to 4.26%
  • 30-yr: -4 bps to 4.85%

• News:
  • Treasury Secretary Bessent said that the FOMC should consider a 50-basis point cut in September.
  • Japan launched an anti-dumping probe into steel products from China and South Korea.
  • Chinese developer Evergrande will be delisted from the Hong Kong Stock Exchange on August 22.
  • Japan sold 5-yr JGBs to soft demand.
  • India's Prime Minister Modi is likely to speak with President Trump on the sidelines of the UN meeting in September.
  • Germany's economy minister said that domestic inflation is likely to remain stable for the remainder of the year.
  • The British government is looking to tighten rules surrounding inheritance transfers, aiming to generate about GBP1.5 bln in annual revenue by 2029.
  • China's July New Loans were down CNY50.0 bln (expected +CNY305.0 bln; last CNY2.240 trln). July Outstanding Loan Growth hit 6.9% yr/yr (expected 7.0%; last 7.1%) and July total social financing reached CNY1.16 trln (expected CNY1.50 trln; last CNY4.20 trln).
  • Japan's July PPI was up 0.2% m/m, as expected (last -0.1%), rising 2.6% yr/yr (expected 2.5%; last 2.9%). August Reuters Tankan Index rose to 9 from 7. July Machine Tool Orders were up 3.6% yr/yr (last -0.5%).
  • South Korea's July Unemployment Rate fell to 2.5% from 2.6%.
  • Australia's Q2 Wage Price Index was up 0.8% qtr/qtr, as expected (last 0.9%), rising 3.4% yr/yr (expected 3.3%; last 3.4%). June Home Loans were up 2.4% m/m (last -1.8%).
  • New Zealand's July Electronic Card Retail Sales rose 0.2% m/m (last 0.5%), increasing 1.7% yr/yr (last -0.3%).
  • Germany's July CPI was up 0.3% m/m, as expected (last 0.0%), rising 2.0% yr/yr, as expected (last 2.0%). July Wholesale Price Index was down 0.1% m/m (expected 0.2%; last 0.2%) but up 0.5% yr/yr (last 0.9%).
  • Spain's July CPI was down 0.1% m/m, as expected (last 0.7%) but up 2.7% yr/yr, as expected (last 2.3%). July Core CPI was up 2.3% yr/yr, as expected (last 2.2%).
• Commodities:
  • WTI Crude: -0.7% to $62.75/bbl
  • Gold: +0.4% to $3411.30/ozt
  • Copper: UNCH at $4.527/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1717
  • GBP/USD: +0.6% to 1.3577
  • USD/CNH: -0.1% to 7.1776
  • USD/JPY: -0.4% to 147.26
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 10.9%; prior 3.1%)
  • 10:30 ET: Weekly crude oil inventories (prior -3.03 mln)