Bond Market Update

Feeling Weak

• U.S. Treasuries are weaker coming out of the overnight trade, which was influenced by rising oil prices that reflected renewed hostilities between the U.S. and Iran. Separately, inflation worries were in the mix after the USTR proposed an added tariff of 10.0% to 12.5% for as many as 60 countries, including China, Japan, and those in the European Union, for using forced labor to make goods for export. There is a good bit of economic data today, with the focal points being the ADP Employment Change report and the Services PMI readings for May. Most PMIs were better than expected in Europe but still below the 50.0 mark, which is the line between expansion (above) and contraction (below). The U.S. Dollar Index is up 0.1% to 99.31.
• Yield Check:
  • 2-yr: +2 bps to 4.07%
  • 3-yr: +2 bps to 4.12%
  • 5-yr: +2 bps to 4.20%
  • 10-yr: +3 bps to 4.48%
  • 30-yr: +1 bp to 4.98%

• News:
  • Iran launched multiple rocket and drone attacks in the Persian Gulf, and the U.S. conducted self-defense strikes on Iran's Qeshm Island. The attacks placed additional pressure on a fragile ceasefire. NBC News
  • Fed Chair Kevin Warsh hired conservative policy analysts Paul Winfree and Daniel Heil as advisers. Bloomberg
  • USTR proposal to impose added tariffs of 10.0% to 12.5% for as many as 60 countries, including China, Japan, and those in the European Union, due to findings of using forced labor to make goods for export.
  • Treasury Secretary Scott Bessent will testify to the Senate Finance Committee today at 10:00 ET
  • Final Services PMI readings for May were better than expected for many European countries but still below 50.0, which is the demarcation line between expansion and contraction.
  • Partners Group decided to cap withdraws from $8.6 bln fund, according to Reuters
  • Eurozone's May HCOB Services PMI 47.7 (expected 46.4; last 47.6); April PPI 0.6% m/m (expected 0.6%; last 3.4%) and 4.9% yr/yr (expected 4.8%; last 2.0%)
  • Australia's Q1 GDP 0.3% qtr/qtr (expected 0.5%; last 0.9%) and 2.5% yr/yr (expected 2.7%; last 2.5%)
• Commodities: 
  • WTI crude: +2.1% to $95.84/bbl
  • Gold: -0.6% to $4491.80/ozt
  • Copper: -0.9% to $6.62/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1620
  • GBP/USD: -0.1% to 1.3454
  • USD/CNH: +0.1% to 6.7702
  • USD/JPY: -0.1% to 159.80
• The Day Ahead:
  • 07:00 ET: MBA Mortgage Applications Index (prior -8.5%)
  • 08:15 ET: May ADP EMployment Change (Briefing.com consensus: 110K; prior 109K)
  • 09:45 ET: May S&P Global U.S. Services PMI - Final (prior 50.9)
  • 10:00 ET: April Factor Orders (Briefing.com consensus: 3.5%; prior 1.5%)
  • 10:00 ET: May ISM Non-Manufacturing Index (Briefing.com consensus: 53.6%; prior 53.6%)
  • 10:00 ET: New York Fed President Williams (FOMC voter)
  • 14:00 ET: Fed's Beige Book