The US bond market faces a test of investor demand for longer-dated maturities, with auctions of 10- and 30-year Treasuries highlighting an otherwise light week for economic events.
The sale of benchmark 10-year notes comes Wednesday, followed by 30-year bonds a day later as part of the Treasury’s $119 billion week of auctions. It kicks off Tuesday with 3-year notes.
Long-dated Treasuries have sold off since the conflict in Iran began, amid concerns that the rise in energy prices would fuel inflation, as well as mounting fiscal pressures.
Tom di Galoma, managing director at Mischler Financial Group, cautioned the auctions may show weaker demand coming out of the Independence Day weekend.
“Whenever you have holidays around large supply weeks there is a good chance of tails coming in multiple auctions,” he said.
On the data front, the ISM services gauge on Monday is the major highlight and it lands after bond traders moderated expectations for interest-rate hikes this year following a June employment report that arrived well below consensus.
Attention will switch midweek to the release of minutes from the June Fed meeting, with investors looking for more insight into officials’ hawkish shift under new Chair Kevin Warsh.
“The minutes should be interesting to gauge dispersion amongst the committee,” said Molly Brooks, US rates strategist at TD Securities. “With Chair Warsh’s desire to decrease forward guidance, the composition and length of the minutes will also be watched to see if there is any immediate shift.”
What to Watch
- Economic data: July 6: S&P Global US services and composite PMI’s; ISM services indexJuly 7: ADP weekly employment change; trade balance; monthly imports and exportsJuly 8: MBA mortgage applications; wholesale inventories and trade sales; consumer creditJuly 9: Initial jobless claims; existing home sales
- Fed calendar:July 6: Fed Governor Christopher WallerJuly 8: Federal Open Market Committee minutes from the June policy meetingJuly 9: NY Fed President John Williams; Dallas Fed President Lorie Logan
- Auction calendar:July 6: 13-, 26-week billsJuly 7: 6-week bills; 52-week bills; three-year notesJuly 8: 17-week bills; 10-year notesJuly 9: 4-, 8-week bills; 30-year bonds
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