US Treasuries gain after Turkey’s failed coup attempt

The US Treasuries gained on Monday as the stocks prices rally petered out and risk aversion rose following a failed coup in Turkey. The yield on the benchmark 10-year Treasury note fell nearly 3 basis points to 1.566 percent and the yield on short-term 2-year note also dipped 2 basis points to 0.686 percent by 12:30 GMT.

Crude oil prices dipped as investors discounted the implications of the attempted coup in Turkey and the trades turned concentrated to bearish fundamentals, while disruptions to crude exports in Libya lent prices some support. The International benchmark Brent futures fell 1.47 percent to $46.90 and West Texas Intermediate (WTI) dipped 1.02 percent to $45.48 by 12:30 GMT.

On Friday, The consumer price index rose 0.2 percent m/m in June, below expectations for a +0.3 percent m/m result, as compared to the unrevised +0.2 percent m/m in May. On an annual basis, it increased 1 percent y/y, marginally lower than the 1.1 percent y/y consensus, versus the unrevised +1.0 percent y/y result that occurred in May.

Despite the overall dampness seen in recent months, we expect a gradual pick-up in inflation readings will be seen in the months ahead. However, we are unlikely to see a substantial move towards the Fed's 2 percent objective until we see greater traction from wage pressures.

Moreover, the retail sales jumped 0.6 percent m/m in June, above market expectations for a +0.1 percent m/m reading, as compared to the revised +0.2 percent m/m reading that occurred in May (previous was +0.5 percent). We continue to anticipate broader improvement in consumer activity in the coming months, which is likely to come hand-in-hand with improvement in employment conditions.

Markets now look ahead to a relatively light calendar in the week ahead, highlighted by housing starts/building permits, Philadelphia Fed manufacturing, existing home sales and leading indicators releases. Commentary will likely be non-existent from the FOMC due to the media blackout period ahead of the July meeting.

Meanwhile, the S&P 500 Futures rose 5.50 points to 2,158.5 by 12:30 GMT.