July proved to be an uneventful month for the U.S. Treasury market, with one exception: rates hardly budged until July 20 when the 10-year note yield rose by 11 basis points (bps) over the course of two days. At month-end, the 10-year yield was at 2.96%, up 10 bps from June’s close. The yield curve flattened modestly, with the 2- to 10-year slope ending the month at 31 bps.
The sudden upward move in rates was largely attributed to speculation that the Bank of Japan (BoJ) would reverse course on its yield curve control program, as well as a growing consensus that the quarterly U.S. GDP print would be higher than initially anticipated. Ultimately, the BoJ kept its policy in place, albeit with some minor adjustments. Further, while GDP growth was huge at 4.1%, it was reasonably close to market expectations. Trade war rhetoric waxed and waned over the course of the month and appeared to have little immediate impact on the bond market.