EM ASIA CREDIT: Cathay Pacific: July passenger numbers out

The TYU5 range has been 111-06 to 111-10+ during the Asia-Pacific session. It last changed hands at 111-07, down 0-06 from the previous close. 

• The US 2-year yield has edged higher trading around 3.844%, up 0.01 from its close.
• The US 10-year yield has moved higher trading around 4.365%, up 0.02 from its close.
• The 10-year yield has moved back towards its pivot within the wider range 4.10% - 4.65%, expect supply around 4.30/35% first up. A close back below 4.30% would begin to get the bulls excited once more and the chopfest within the range will continue.
• Nick Timiraos on X: Goldman: "Market participants seem to agree that the risk to Fed independence is rising, as 5-year 5-year forward inflation swaps have recently decoupled higher from their prior close relationship with the 2-year note yield."
• Bloomberg - “Lawrence Summers backed Scott Bessent’s questioning of the Fed’s non-monetary policy activities, saying that there were some areas that are distinct from the broader issue of central bank independence.”
• Jeff Weniger on X: “Understand this and you'll be ahead of 99% of the public on official inflation dynamics. Similar to work by my WisdomTree colleague @JeremyDSchwartz, we see that the CPI for rent is still playing catch-up after the Covid money splash. The CPI reports of 2025 are overstating rent and will continue to do so until the catch-up is complete.” See Graph Below.

• Data/Events: MBA Mortgage Applications, Existing Home Sales

  Fig 1: CPI Vs CPI For Rent

  

  Source: MNI/@JeffWeniger/Refinitiv

• China bond futures are down in the morning session with the 10-year having its largest one day fall since May.  
• The 10-year is down -0.20 at 108.43 and has traded below all major moving averages which it had not done since late May.  
• The PBOC withdrew liquidity during this morning's OMO marking three consecutive days of withdrawals.  

• The 2-year future is also down, by -0.04 to 102.36 and remains below all major moving averages.  The nearest being the 20-day EMA of 102.43.
• The 10YR CGB is higher by +1.5bp to 1.71%

Gold prices have trended moderately lower today following the conclusion of a trade deal between Japan and the US lifting optimism that others, especially the EU and China, may also be able to reach an agreement before August 1. Bullion had a strong start to the week rising almost 2.5% over Monday/Tuesday. Today it is down 0.2% to $3423.6/oz but off the intraday low of $3419.27 with the BBDXY USD index and US yields slightly higher. 

• Gold continues to be supported by concerns over Fed independence.
• Silver is also lower at -0.1% to $39.25 after rising to $39.38 but off today’s low of $39.13. It was up almost 3% over Monday/Tuesday.
• US imports from Japan, including autos, will face a 15% tariff down from the 24% announced in April but higher than the current average below 5%. This lower rate is in exchange for $550bn of Japanese investment in the US.
• Treasury Secretary Bessent is scheduled to meet China officials in Stockholm next week with the aim of extending the current hold on tariffs.
• The US-Japan trade deal has driven an improvement in risk appetite with equities higher (Nikkei +3.2%, Hang Seng +1.1% & S&P e-mini +0.2%). Oil prices are higher with WTI +0.3% to $65.48/bbl and copper up 0.9%.
• Later June US existing home sales and preliminary July euro area consumer confidence print.