1204 ET - Long-term Treasury yields are likely to fall in the near future, while the front end of the curve remains elevated, Bank of America's Meghan Swiber and Eleanor Xiao write. They say investors who had bet on a back-end selloff, which would take long-term yields higher, are losing money. That makes them prone to unwind their short positions, which would increase demand for long-term bonds and weigh on yields. "Foreign demand stays soft, reinforcing a split demand backdrop," Swiber and Xiao say. They see "a tactical tension but not a strategic shift," and stay short two-year Treasurys. (paulo.trevisani@wsj.com; @ptrevisani)
1156 ET - While geopolitics remains important, the bigger market driver in the second half of the year might be monetary policy, Columbia Threadneedle Investments' Anthony Willis says in a note. In the U.S., the economy remains resilient and the Federal Reserve has adopted a more hawkish tone, the senior economist says. "As investors reassess whether the Fed may need to raise rates again--and how often--market pricing is likely to remain sensitive to incoming data and central bank communication," he says. (emese.bartha@wsj.com)
1136 ET - Heatwaves pose a new downside risk to European growth, ING's Carsten Brzeski says in a note. Germany, France and the U.K. among others experienced their hottest days on record for June in the last week. A 2021 study of Europe's worst heat years put GDP losses from reduced labor productivity alone at 0.3%-0.5%, exceeding 1% in the most exposed regions, Brzeski says. Add rising healthcare costs, emergency infrastructure repairs and the impact of heatwaves on waterways, transportation or agriculture, the economic hit increases further. For northern European countries like Germany, infrastructure, housing stock and sectors like construction and logistics were built for a cooler climate and haven't adapted to the new reality. "Thermometers, it turns out, have become a leading indicator of economic growth," Brzeski adds. (edward.frankl@wsj.com)
1120 ET - Bitcoin is back below $60,000 as investors guess what data coming soon will mean for the economy and appetite for risk-on assets like bitcoin and other cryptocurrencies. "For the week ahead the focus will be on whether the data justifies Warsh's hawkish posture, particularly the jobs report on Thursday and the ISM Manufacturing survey on Wednesday," says Stephen Coltman of 21shares in a note. Focus is also being put on the activities of bitcoin treasury firm Strategy, with company head Michael Saylor expected to do an interview this week that may disclose the company's next steps - including if it plans on selling any more of its huge bitcoin stockpiles to fund operations. (kirk.maltais@wsj.com)
1120 ET - The U.K. is not the only major economy facing fiscal risks, Capital Economics' Vicky Redwood says in a note. Several other major economies such as the U.S., France, and Italy "face challenging fiscal positions and upcoming political events that could trigger renewed bond market volatility," she says. Recent bond market reactions indicate that investors are more responsive to fiscal credibility than they are to debt levels alone, Redwood says. (miriam.mukuru@wsj.com)
1052 ET - Robinhood Markets' prediction markets business is gaining momentum with volumes accelerating over the past week, putting the metric on track to land nearly 40% ahead of analysts' estimate for the second quarter, Truist Securities analysts say in a note. Prediction revenue could see even greater upside than just applying Wall Street's take rate to the volume upside given the World Cup is likely driving considerable volume, the analysts say. Such contracts are tradable on Robinhood's own Rothera exchange, where it does not share revenue with third-party exchanges, they say. All in, Robinhood is on pace for its best trading month ever in June for equities, options and prediction markets, making for a "hat trick, unassisted by crypto," they say. (kelly.cloonan@wsj.com)
1038 ET - Concerns about U.K. fiscal policies could weigh on long-dated gilts, hindering their yields from falling considerably, eToro global market analyst Lale Akoner says. Investors are keen to find out the detailed fiscal and economic policies of the incoming government, after Keir Starmer's resignation from the prime minister role. "Speculation over who replaces Rachel Reeves at the Treasury adds another layer of uncertainty," Akoner says. Gilt investors could demand more compensation for fiscal risk, keeping long-dated gilt yields fairly high, she says. U.K. 30-year gilt yields last trade at 5.433%, higher than the German 30-year Bund yields at 3.416%, Tradeweb data show. (miriam.mukuru@wsj.com)
1033 ET - The Supreme Court has rejected President Trump's attempt to fire Federal Reserve board member Lisa Cook. The decision preserves her position and is widely seen as reinforcing the Federal Reserve's independence. In a 5-4 decision, the Court upheld the lower courts' rulings that Cook could continue serving at the central bank as her legal case challenging the termination moves forward. "The Government has not shown that it is likely to prevail on the legal arguments advanced in its stay application," the Court said. Cook launched her legal battle on Aug. 28 after Trump attempted to remove her from the Fed amid allegations she made false claims on mortgage documents in 2021 that may have secured her more favorable loan terms. (patrick.sheridan@wsj.com)
1012 ET - Japanese authorities seem to be refraining from further interventions to curb the yen's weakness, XM analyst Achilleas Georgolopoulos says as the yen falls to a near two-year low against the dollar. The yen is weaker after the Japanese government published its draft economic blueprint urging the Bank of Japan to align its monetary policy decisions with the government's growth agenda, he says. This implies "low interest rates and a very gradual exit from the current accommodative stance." The dollar rises to as high as 161.96 yen, according to LSEG. If it rises above 161.99, it would reach the highest levels in nearly 40 years. (renae.dyer@wsj.com)
0957 ET - House hunters were still heading south last quarter, with Orlando, Fla., as the most popular destination. Redfin says that roughly one in five--19.1%--U.S. house hunters looked to move from one part of the country to another in 1Q. That's up slightly from 18.9% a year earlier. Housing costs are near record highs because mortgage rates and sale prices remain high, and inflation is pushing up everyday expenses. That's motivating people to move to more affordable areas. The typical Orlando home costs just over $400,000, roughly half the cost of the typical home in New York. Orlando was followed by three other Florida metros: North Port, Miami and Cape Coral. Half of the most popular destinations are in Florida, and all are relatively affordable, especially compared to the places people are most commonly leaving. (chris.wack@wsj.com)
0938 ET - June payrolls are likely to remain robust, but there are downside risks, Bank of America economists write. They expect Thursday's report to show 110,000 jobs added, a slowdown from May's 172,000, but still a healthy pace. BofA forecasts the unemployment rate steady at 4.3%. The economists warn that "May's surge in leisure [and] hospitality may have been driven by the World Cup or Memorial Day timing, and if it was the latter, June could see payback." A strong report "would likely move markets closer to our call for three hikes," this year, the economists say. WSJ consensus calls for a 118,000 growth in June payrolls. (paulo.trevisani@wsj.com; @ptrevisani)
0926 ET - Investors in U.K. government bonds, or gilts, have near-term reassurance that the potential next prime minister, Andy Burnham, will maintain fiscal prudence following his speech on Monday, Aberdeen Investments' Alex Everett says in a note. Burnham outlined an ambitious plan to reduce welfare expenditure, which signals some willingness to take challenging decisions, Everett says. "With such a focus on investment and improvement spending, the re-affirmation of prudence was welcome at this relatively early stage," he says. Ten-year gilt yields fall 1 basis point to last trade at 4.723%, Tradeweb data show. (miriam.mukuru@wsj.com)