Bond Market Update

Short End Dips After Friday Jump

• U.S. Treasuries began the week on a slightly lower note with shorter tenors displaying relative weakness while the long end also started lower, but the 30-yr bond eventually recovered its opening loss. The market followed Friday's strong rally with an uneventful start to the week in both equities and Treasuries. Treasuries started the day in negative territory with the long bond spending the entire day in a slow rise off its opening level while the short end navigated a narrow sideways range through the day. Today's lone economic report—July New Home Sales (652,000; Briefing.com consensus 630,000)—was met with a muted reaction but more data will be released tomorrow morning. In addition, the U.S. Treasury will sell $69 bln in 2-yr notes. Crude oil climbed to its best level in more than two weeks while the U.S. Dollar Index jumped 0.7% to 98.43.
• Yield Check:
  • 2-yr: +4 bps to 3.73%
  • 3-yr: +4 bps to 3.68%
  • 5-yr: +3 bps to 3.79%
  • 10-yr: +2 bps to 4.28%
  • 30-yr: UNCH at 4.89%

• News:
  • Fitch affirmed the AA+ rating of the U.S. with a Stable outlook.
  • Japan's June Leading Index was up 0.8% m/m (expected 1.3%; last 0.6%) and Coincident Indicator was up 0.7% m/m (expected 0.8%; last 0.0%).
  • Singapore's July CPI was down 0.4% m/m (last -0.1%) but up 0.6% yr/yr (expected 0.7%; last 0.8%). July Core CPI was up 0.5% yr/yr (last 0.6%).
  • New Zealand's Q2 Retail Sales rose 0.5% qtr/qtr (expected 0.1%; last 0.8%), increasing 0.7% yr/yr (expected -0.3%; last 0.4%).
  • Germany's August ifo Business Climate Index hit 89.0 (expected 88.7; last 88.6). August Current Assessment dipped to 86.4 from 86.5 (expected 86.7) and Business Expectations rose to 91.6 from 90.8 (expected 90.2).
  • Swiss Q2 Employment increased to 5.532 mln from 5.512 mln.
  • Spain's July PPI was up 0.3% yr/yr (last 0.8%).
• Today's Data:
  • New home sales decreased 0.6% month-over-month in July to a seasonally adjusted annual rate of 652,000 units (Briefing.com consensus 630,000) from an upwardly revised 656,000 (from 627,000) in June. On a year-over-year basis, new home sales were down 8.2%.
    • The key takeaway from the report is that the pace of sales was sluggish, owed in part to the upward revision for June. However, the affordability constraint associated with higher mortgage rates and a reduced supply of lower-priced homes was evident, as sales were lackluster month-over-month despite a drop in median and average selling prices.
• Commodities:
  • WTI crude: +1.7% to $64.78/bbl
  • Gold: UNCH at $3417.40/ozt
  • Copper: +0.5% to $4.48/lb
• Currencies:
  • EUR/USD: -1.0% to 1.1603
  • GBP/USD: -0.5% to 1.3449
  • USD/CNH: -0.2% to 7.1597
  • USD/JPY: +0.7% to 147.92
• The Day Ahead:
  • 8:30 ET: July Durable Orders (Briefing.com consensus -3.5%; prior -9.3%) and Durable Orders ex-transport (Briefing.com consensus 0.1%; prior 0.2%)
  • 9:00 ET: June FHFA Housing Price Index (Briefing.com consensus -0.1%; prior -0.2%) and June S&P Case-Shiller Home Price Index (Briefing.com consensus 2.8%; prior 2.8%)
  • 10:00 ET: August Consumer Confidence (Briefing.com consensus 96.3; prior 97.2)
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results