Bond Market Update

Inching Higher

• U.S. Treasuries are on track for a modestly higher start after a steady overnight rise in the futures market. Treasury futures began inching higher after yesterday's cash close, maintaining their upward path into the night. The advance has been accompanied by gains in other sovereign debt while global equities have been mixed. Overnight action saw a continuation of a record run in South Korea's Kospi (+2.3%) amid a light news flow. Japan sold 40-yr JGBs to weak demand even though the auction size was reduced. The U.S. session will be free of top-tier data but the U.S. Treasury will auction $70 bln in 5-yr notes at 13:00 ET. Crude oil has deepened its pullback, falling to $90/bbl, while the U.S. Dollar Index is little changed at 99.13.
• Yield Check:
  • 2-yr: UNCH at 4.05%
  • 3-yr: -1 bp to 4.09%
  • 5-yr: UNCH at 4.18%
  • 10-yr: -1 bp to 4.48%
  • 30-yr: -2 bps to 5.01%

• News:
  • The Reserve Bank of New Zealand left its official cash rate at 2.25%, as expected. Three out of seven policymaker voted for a hike, so a rate increase is expected in the coming months.
  • Samsung's unionized workers approved the wage and bonus deal offered by the company.
  • The European Central Bank's latest Financial Stability review warned that high government spending needs and high hedge fund exposure to sovereign debt could amplify financial instability.
  • European Central Bank policymaker Stournaras said that a June rate hike is likely.
  • French Finance Minister Lescure said that a budget without tax increases will be presented with the deficit target remaining below 5%.
  • China's April Industrial Profit was up 18.2% YTD (last 15.5%).
  • Japan's April Corporate Services Price Index was up 3.0% yr/yr (expected 3.3%; last 3.3%).
  • Australia's April MI Leading Index was unchanged m/m (last -0.1%). Q1 Construction Work Done was up 3.4% qtr/qtr (expected 0.8%; last 0.2%) and April CPI Indicator was up 4.2% yr/yr (expected 4.4%; last 4.6%). 
  • France's May Consumer Confidence fell to 82 from 84 (expected 83).
  • Italy's March Industrial Sales rose 2.0% m/m (last 0.5%), increasing 4.4% yr/yr (last 0.5%).
  • Swiss May ZEW Expectations rose to -11.1 from -30.3.
• Commodities:
  • WTI Crude: -3.6% to $90.54/bbl
  • Gold: -1.3% to $4441.80/ozt
  • Copper: -0.7% to $6.351/lb
• Currencies:
  • EUR/USD: UNCH at 1.1634
  • GBP/USD: -0.1% to 1.3433
  • USD/CNH: UNCH at 6.7832
  • USD/JPY: +0.1% to 159.44
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -8.5%; prior -2.3%)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results