The New York bond market this week (July 6-10) will focus on the June Federal Open Market Committee (FOMC) minutes scheduled for release on July 8. Market participants are seeking clues about the timing of potential rate hikes, with consensus expectations still pointing to one rate increase within the year. Fed Chair Kevin Wash eliminated forward guidance at last month's FOMC, leaving no hints about future policy direction. In the June FOMC dot plot, 9 of 18 officials projected a rate hike within the year, and with forward guidance removed, a rate increase proposal could surface as early as this month's meeting (July 28-29).
June non-farm payroll growth of 57,000 jobs fell short of market expectations, leading to relief that a rate hike this month is unlikely. However, the 57,000 figure itself is not necessarily weak. The general consensus is that the "breakeven employment level" — the monthly job creation needed to maintain stable unemployment — has fallen significantly from the past due to President Donald Trump's strict immigration enforcement policies.
Treasury Yields Rise Across Curve in Prior Week
According to Yonhap Infomax's overseas interest rates data (screen number 6533), the 10-year US Treasury yield stood at 4.4870% as of July 2 (local time), up 11.50 basis points from the previous week. This marked the first increase in four weeks.
The 2-year yield, which is sensitive to Fed monetary policy, rose 4.70bp to 4.1410%. The 2-year yield has alternated between gains and losses weekly since late May.
The 30-year yield climbed 12.30bp to 4.9890%, rebounding alongside the 10-year for the first time in four weeks.
The spread between 10-year and 2-year yields widened 6.80bp to 34.60bp (bear steepening). The spread has expanded for two consecutive weeks.
US job openings in May hit a two-year high early in the week, reinforcing perceptions of a resilient labor market. While June non-farm payrolls significantly undershot expectations, long-term rates demonstrated downside rigidity.
The benchmark 10-year yield recovered its 50-day moving average on the back of last week's rebound. The New York bond market concluded the week's trading at 2 PM on Thursday, July 2, due to the Independence Day holiday.
According to the CME FedWatch tool, Fed funds rate futures priced in approximately 30bp of rate hikes within the year as of shortly after the New York market close on July 2, roughly 1bp less than a week earlier. This pricing suggests one 25bp hike is certain, with about a 20% probability of an additional 25bp increase.
ISM Services PMI and Treasury Auctions Scheduled for Week Ahead
The US economic data calendar is relatively light this week. The Institute for Supply Management's (ISM) June services Purchasing Managers' Index (PMI, July 6) carries the most weight among this week's releases.
The ISM June services PMI is expected to decline marginally from May (54.5) but remain well above the baseline of 50.
Among the sub-indices, the prices paid index — which reflects inflationary pressures — will be watched to see how much it falls in response to the recent sharp drop in international oil prices. In the ISM manufacturing PMI for the same month released last week, the prices paid index plunged (82.1→73.0), exerting greater influence than the headline figure.
Other economic indicators include S&P's June services PMI final reading (July 6), the New York Federal Reserve's monthly Survey of Consumer Expectations (SCE) and May trade balance (July 7), and May wholesale inventories (July 8).
The FOMC minutes may be shorter in length or contain reduced forward-looking content to reflect Chair Wash's communication style. The April FOMC minutes PDF document ran approximately 13 pages of body text.
Among senior Fed officials, Christopher Waller (Board Governor, July 6), John Williams (New York Fed President) and Lorie Logan (Dallas Fed President, July 9) are scheduled to appear. Waller will participate in a panel discussion at a conference hosted by the Bank of Italy.
The US Treasury will auction a total of $119 billion in Treasuries over three consecutive days starting July 7. The schedule begins with $58 billion in 3-year notes, followed by $39 billion in 10-year notes and $22 billion in 30-year bonds.
FAQ
When will the June FOMC minutes be released?
The June Federal Open Market Committee minutes are scheduled for release on July 8.
What Treasury auctions are scheduled this week?
The US Treasury will conduct auctions over three consecutive days starting July 7, offering $58 billion in 3-year notes, $39 billion in 10-year notes, and $22 billion in 30-year bonds, totaling $119 billion.
