Bond Market Update

Mixed Finish to Volatile Week

• U.S. Treasuries had a mixed showing on Friday, which returned longer and shorter tenors to little changed for the week that saw fresh 2026 highs in yields across the curve. The trading day started with losses across the curve and relative weakness in longer tenors after a night of selling in global sovereign debt and most equity markets. There was an ongoing sense of Iran-related unease going into the weekend after it was reported that the Pentagon is sending additional troops to the region. That said, President Trump indicated that he will delay strikes on Iran's energy infrastructure by another few days to make room for negotiations. Treasuries widened their starting losses during the first few minutes of action but bounced shortly after 2-yr yield briefly climbed above a high that was set just before Monday's cash open. The 2-yr note remained at the forefront of the rebound into the afternoon, finishing on its high while the long bond lagged after outperforming earlier this week, finishing near its starting level. The advance up front helped the 2-yr note erase the bulk of this week's loss while the long bond turned negative for the week during today's retreat. The yield curve steepened a touch this week with the 2s10s spread expanding by two basis points to 52 bps. Crude oil finished the week just shy of $100/bbl while the U.S. Dollar Index rose 0.3% to 100.15, adding 0.7% for the week.
• Yield Check:
  • 2-yr: -6 bps to 3.92% (+3 bps this week)
  • 3-yr: -5 bps to 3.94% (+3 bps this week)
  • 5-yr: -3 bps to 4.07% (+6 bps this week)
  • 10-yr: +2 bps to 4.44% (+5 bps this week)
  • 30-yr: +5 bps to 4.98% (+2 bps this week)

• News:
  • President Trump ordered the Department of Homeland Security to pay TSA agents.
  • The Fed is expected to reduce its purchases of Treasury bills after the April 15 tax deadline.
  • Japan's Finance Minister Katayama warned about a potential intervention in the currency market after the yen approached 160/dollar, its weakest level since mid-2024.
  • The Japanese government confirmed a provisional budget of JPY8.6 trln.
  • China has yet to confirm the rescheduled mid-May meeting between Presidents Trump and Xi.
  • China imposed a 55% additional tariff on beef imports from Australia.
  • China's February Industrial Profit was up 15.2% YTD (last 0.6%).
  • U.K.'s February Retail Sales were down 0.4% m/m (expected -0.6%; last 2.0%) but up 2.5% yr/yr (expected 2.1%; last 4.8%). February Core Retail Sales were down 0.4% m/m (expected -0.8%; last 2.2%) but up 3.4% yr/yr (expected 2.9%; last 5.9%).
  • Italy's February non-EU trade surplus reached EUR5.53 bln (last surplus of EUR2.23 bln).
  • Spain's flash March CPI was up 1.0% m/m (expected 1.2%; last 0.4%), rising 3.3% yr/yr (expected 3.6%; last 2.3%). Flash March Core CPI was up 2.7% yr/yr (last 2.7%).
• Today's Data:
  • The final reading of the University of Michigan Consumer Sentiment for March fell to 53.3 (Briefing.com consensus: 55.5) from the preliminary reading of 55.5. The final reading for February was 56.6. In the same period a year ago, the index stood at 57.0.
    • The key takeaway from the report is that it conveyed large drops in sentiment among consumers with middle and higher incomes, who were dealing with rising gas prices and falling stock prices in the wake of the Iran war.
• Commodities:
  • WTI crude: +5.4% to $99.51/bbl
  • Gold: +2.6% to $4492.80/ozt
  • Copper: +0.6% to $5.50/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1512
  • GBP/USD: -0.5% to 1.3267
  • USD/CNH: UNCH at 6.9206
  • USD/JPY: +0.4% to 160.27
• The Week Ahead:
  • Monday: Nothing of note
  • Tuesday: January FHFA Housing Price Index (Briefing.com consensus 0.0%; prior 0.1%) and January S&P Case-Shiller Home Price Index (Briefing.com consensus 1.3%; prior 1.4%) at 9:00 ET; March Chicago PMI (Briefing.com consensus 54.8; prior 57.7) at 9:45 ET; February Job Openings (Briefing.com consensus 6.795 mln; prior 6.946 mln) and March Consumer Confidence (Briefing.com consensus 88.0; prior 91.2) at 10:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -10.5%) at 7:00 ET; March ADP Employment Change (Briefing.com consensus 42,000; prior 63,000) at 8:15 ET; February Retail Sales (Briefing.com consensus 0.5%; prior -0.2%) and Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.0%) at 8:30 ET; final March S&P Global U.S. Manufacturing PMI (prior 52.4) at 9:45 ET; March ISM Manufacturing (Briefing.com consensus 52.3%; prior 52.4%) at 10:00 ET; and weekly crude oil inventories (prior +6.93 mln) at 10:30 ET
  • Thursday: Weekly Initial Claims (Briefing.com consensus 215,000; prior 210,000), Continuing Claims (prior 1.819 mln), and February Trade Balance (Briefing.com consensus -$55.8 bln; prior -$54.5 bln) at 8:30 ET; January Business Inventories (prior 0.1%) at 10:00 ET; and weekly natural gas inventories (prior -54 bcf) at 10:30 ET
  • Friday: March Nonfarm Payrolls (Briefing.com consensus 51,000; prior -92,000), Nonfarm Private Payrolls (Briefing.com consensus 51,000; prior -86,000), Unemployment Rate (Briefing.com consensus 4.4%; prior 4.4%), Average Hourly Earnings (Briefing.com consensus 0.4%; prior 0.4%), and Average Workweek (Briefing.com consensus 34.3; prior 34.3) at 8:30 ET; Final March S&P Global U.S. Services PMI (prior 51.1) at 9:45 ET; March ISM Non-Manufacturing Index (Briefing.com consensus 54.9%; prior 56.1%) at 10:00 ET; Treasury market to close at 12:00 ET; equity markets closed all day for Good Friday

Bounce Extended

• U.S. Treasuries have extended their rebound off morning lows with the 2-yr note rallying strongly after underperforming earlier this week. Thanks to today's show of strength, the 2-yr yield is now up just three basis points for the week while the 30-yr yield is now down one basis point since last Friday. This has masked significant volatility over the past few days that saw the 10-yr yield bounce inside a 17-basis point range as the market remained sensitive to speculation about the course of the conflict with Iran. Similarly, equities have been weighed down by concerns about inflation that is likely to result from the recent jump in energy prices. WTI crude is up nearly $4.00/bbl at $98.42/bbl today, reclaiming the remainder of this week's loss.
• Yield Check:
  • 2-yr: -6 bps to 3.92%
  • 3-yr: -5 bps to 3.94%
  • 5-yr: -3 bps to 4.07%
  • 10-yr: UNCH at 4.42%
  • 30-yr: +2 bps to 4.95%

Short End Bounces

• U.S. Treasuries have climbed off their early lows with 3s and 2s turning positive while longer tenors remain in the red with the long bond continuing today's underperformance. Treasuries extended their starting losses during the first hour of action, lifting yields on 10s and 30s to levels last seen in mid-July while the 2-yr yield reached a level last seen in early June. However, the market found resistance, reaching highs in recent trade after the release of a disappointing Consumer Sentiment Index from the University of Michigan (53.3; Briefing.com consensus 55.5). Despite today's underperformance, longer tenors are on track to finish the week little changed with the 30-yr yield currently flat for the week while the 2-yr yield is up seven basis points from last week's settlement.
• Yield Check:
  • 2-yr: -2 bps to 3.96%
  • 3-yr: -2 bps to 3.97%
  • 5-yr: UNCH at 4.10%
  • 10-yr: +3 bps to 4.44%
  • 30-yr: +3 bps to 4.97%

Data Recon

• The final reading of the University of Michigan Consumer Sentiment for March fell to 53.3 (Briefing.com consensus: 55.5) from the preliminary reading of 55.5. The final reading for February was 56.6. In the same period a year ago, the index stood at 57.0.
  • The key takeaway from the report is that it conveyed large drops in sentiment among consumers with middle and higher incomes, who were dealing with rising gas prices and falling stock prices in the wake of the Iran war.
• Yield Check:
  • 2-yr: -2 bps to 3.96%
  • 3-yr: -2 bps to 3.97%
  • 5-yr: UNCH at 4.10%
  • 10-yr: +3 bps to 4.44%
  • 30-yr: +3 bps to 4.97%

Geopolitical Concerns Persist as Weekend Looms

• U.S. Treasuries are on track for a lower start in longer tenors while the short end is expected to show some early relative strength. Treasury futures on longer tenors faced overnight pressure alongside other sovereign debt as global investors remained uneasy about the uncertainty surrounding the conflict with Iran ahead of another weekend. Iran has shown little interest in a peace plan proposed by the U.S., though President Trump again delayed planned attacks on Iran's energy infrastructure to allow for negotiations. Meanwhile, the Pentagon is sending an additional 10,000 troops to the Middle East, giving the market another reason to speculate that the conflict could continue for some time. Treasury futures reached lows shortly after the start of the European session, followed by a shallow bounce over the past couple hours. Today's economic data will be limited to the 10:00 ET release of the final March Consumer Sentiment survey from the University of Michigan (Briefing.com consensus 55.5; prior 55.5). Crude oil is back above $95/bbl while the U.S. Dollar Index is up 0.2% at 100.06.
• Yield Check:
  • 2-yr: +2 bps to 4.00%
  • 3-yr: +3 bps to 4.02%
  • 5-yr: +4 bps to 4.14%
  • 10-yr: +4 bps to 4.46%
  • 30-yr: +4 bps to 4.98%

• News:
  • President Trump ordered the Department of Homeland Security to pay TSA agents.
  • The New York Fed is expected to reduce its purchases of Treasury bills after the April 15 tax deadline.
  • Japan's Finance Minister Katayama warned about a potential intervention in the currency market after the yen approached 160/dollar, its weakest level since mid-2024.
  • The Japanese government confirmed a provisional budget of JPY8.6 trln.
  • China has yet to confirm the rescheduled mid-May meeting between Presidents Trump and Xi.
  • China imposed a 55% additional tariff on beef imports from Australia.
  • China's February Industrial Profit was up 15.2% YTD (last 0.6%).
  • U.K.'s February Retail Sales were down 0.4% m/m (expected -0.6%; last 2.0%) but up 2.5% yr/yr (expected 2.1%; last 4.8%). February Core Retail Sales were down 0.4% m/m (expected -0.8%; last 2.2%) but up 3.4% yr/yr (expected 2.9%; last 5.9%).
  • Italy's February non-EU trade surplus reached EUR5.53 bln (last surplus of EUR2.23 bln).
  • Spain's flash March CPI was up 1.0% m/m (expected 1.2%; last 0.4%), rising 3.3% yr/yr (expected 3.6%; last 2.3%). Flash March Core CPI was up 2.7% yr/yr (last 2.7%).
• Commodities:
  • WTI Crude: +2.2% to $96.55/bbl
  • Gold: +0.9% to $4416.50/ozt
  • Copper: UNCH at $5.476/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1506
  • GBP/USD: -0.4% to 1.3281
  • USD/CNH: UNCH at 6.9206
  • USD/JPY: +0.1% to 159.86
• Data out Today:
  • 10:00 ET: Final March University of Michigan Consumer Sentiment (Briefing.com consensus 55.5; prior 55.5)