Bond Market Update

Long End Leads

• U.S. Treasuries are on track for a firmly higher start in longer tenors while the short end is on course for a flat start. Treasury futures enjoyed a relief rally last evening after President Trump said that he does not intend to fire Fed Chairman Powell after all. The overnight rally produced highs at the start of the Asian session, followed by a return to those levels in recent action. The market received a big batch of global data with flash April Manufacturing PMI reading (48.5) from Japan showing the tenth consecutive month of contracting activity while Germany's Manufacturing PMI showed an ongoing contraction (48.0) and a dip into contraction in Services (48.8). The U.S. session will also see the release of flash April PMI readings, followed by March New Home Sales (Briefing.com consensus 684,000; prior 676,000) at 10:00 ET. The U.S. Treasury will follow yesterday's poor sale of 2-yr notes with a $70 bln 5-yr note offering. Crude oil is on the rise while the U.S. Dollar Index is up 0.2% at 99.12.
• Yield Check:
  • 2-yr: UNCH at 3.81%
  • 3-yr: UNCH at 3.81%
  • 5-yr: -4 bps to 3.94%
  • 10-yr: -9 bps to 4.30%
  • 30-yr: -13 bps to 4.75%

• News:
  • Japan's flash April Manufacturing PMI hit 48.5 (expected 48.7; last 48.4) and flash Services PMI hit 52.2 (last 50.0). February Tertiary Industry Activity Index rose to -0.90 from -8.6.
  • South Korea's April Consumer Confidence rose to 93.8 from 93.4.
  • India's flash April Manufacturing PMI hit 58.4 (last 58.1) and flash Services PMI hit 59.1 (last 58.5).
  • Singapore's March CPI was down 0.1% m/m (last 0.8%) but up 0.9% yr/yr (expected 1.0%; last 0.9%). March Core CPI was up 0.5% yr/yr (last 0.6%).
  • Hong Kong's March CPI was unchanged m/m (last -0.1%), rising 1.4% yr/yr (last 1.4%)
  • Australia's flash April Manufacturing PMI hit 51.7 (last 52.1) and flash Services PMI hit 51.4 (last 51.6).
  • New Zealand's March Credit Card Spending was up 0.8% yr/yr (last 0.8%).
  • Eurozone's February Construction Output was down 0.48% m/m (last 0.58%). February trade surplus reached EUR24.0 bln (last surplus of EUR800 mln). Flash April Manufacturing PMI hit 48.7 (expected 47.4; last 48.6) and flash Services PMI hit 49.7 (expected 50.4; last 51.0).
  • Germany's flash April Manufacturing PMI hit 48.0 (expected 47.5; last 48.3) and flash Services PMI hit 48.8 (expected 50.3; last 50.9).
  • U.K.'s flash April Manufacturing PMI hit 44.0, as expected (last 44.9) and flash Services PMI hit 48.9 (expected 51.5; last 52.5). March Public Sector Net Borrowing reached GBP16.44 bln (expected GBP15.40 bln; last GBP12.31 bln).
  • France's flash April Manufacturing PMI hit 48.2 (expected 47.9; last 48.5) and flash Services PMI hit 46.8 (expected 47.7; last 47.9).
• Commodities:
  • WTI Crude: +0.4% to $63.85/bbl
  • Gold: -2.2% to $3345.30/ozt
  • Copper: +0.9% to $4.923/lb
• Currencies:
  • EUR/USD: +0.4% to 1.1407
  • GBP/USD: +0.1% to 1.3299
  • USD/CNH: -0.2% to 7.2864
  • USD/JPY: -0.6% to 141.70
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -12.7%; prior -8.5%)
  • 9:45 ET: Flash April S&P Global US Manufacturing PMI (prior 50.2) and flash S&P Global US Services PMI (prior 54.4)
  • 10:00 ET: March New Home Sales (Briefing.com consensus 684,000; prior 676,000)
  • 10:30 ET: Weekly crude oil inventories (prior +515,000)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results