1. UST yields rose across the curve last week, led by the belly and long end. The 2Y yield increased 7bps WoW to 4.21%, while the 10Y and 30Y yields rose 7bps and 8bps to 4.56% and 5.06%, respectively. The move was driven mainly by renewed Middle East tensions, which pushed oil prices higher and revived concerns that energy costs could keep inflation elevated for longer.
2. SGS yields traded range-bound last week, The 2Y increased 1bp WoW to 1.57%. while 5Y and 10Y was stable at 1.76% and 2.12%, respectively.
3. The market will focus on the June US CPI release on Tuesday, followed by PPI on Wednesday. Consensus expects headline CPI inflation to ease to around 3.8% YoY from 4.2% in May, while core CPI is expected at around 2.8% YoY. Core PPI is expected to rise around 0.4% MoM. Hence, we expect UST yields to remain biased higher. Stable core inflation should limit a sharp repricing but renewed Middle East tensions could lift oil prices and inflation expectations, placing further upward pressure on yields. Domestically, May’s retail data is unlikely to change the SGS outlook. Retail spending softened, but the weakness was selective rather than broad-based. Recreational goods, watches and jewellery, and technology remained resilient. Hence, we expect SGS yields to remain broadly range-bound with a slight upward bias, tracking UST movements while the front end remains anchored by stable domestic condition.

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