Bond Market Update

Weekly Advance Secured

• U.S. Treasuries climbed to end the week, pressuring yields on longer tenors to their lows from Wednesday while the 5-yr yield settled at its lowest level in nearly three weeks. The trading day started with relative strength in 10s and 30s after overnight action featured some indications of potential thawing on the tariff front with news that China could implement tariff exemptions on medical equipment and certain industrial chemicals, similar to what was offered during President Trump's first term. Treasuries spent the first three hours of action in a sideways range, but extended to fresh highs alongside an advance in equities, which ran into a midday speedbump after President Trump said that tariffs on imports from China will not be removed unless there are concessions on the Chinese side, echoing remarks from Treasury Secretary Bessent. The comments pressured stocks from highs while Treasuries remained at their best levels into the close, making for a solid finish to a week that saw some concerns about weak auction demand. Corporate debt had a solid finish to the week, lifting the iShares iBoxx Investment Grade Corporate Bond ETF (LQD 107.92, +0.50, +0.5%) and iShares iBoxx High Yield ETF (HYG 78.79, +0.09, +0.1%) to their best levels in about three weeks. Crude oil overcame overnight weakness, but still lost nearly $1/bbl for the week, while the U.S. Dollar Index rose 0.1% to 99.51, adding 0.3% for the week.
• Yield Check:
  • 2-yr: -3 bps to 3.76% (-4 bps this week)
  • 3-yr: -3 bps to 3.76% (-4 bps this week)
  • 5-yr: -4 bps to 3.88% (-6 bps this week)
  • 10-yr: -4 bps to 4.27% (-6 bps this week)
  • 30-yr: -3 bps to 4.74% (-6 bps this week)

• News:
  • People's Bank of China Governor Pan confirmed that the PBoC will maintain moderately loose policy.
  • China's National People's Congress Standing Committee will meet early next week.
  • Japan's Economy Minister Akazawa repeated that an extra budget is not being planned right now.
  • South Korea will hold technical trade talks with U.S. officials on May 15-16.
  • Policy analyst Pieter Cleppe noted the opportunity for the EU to potentially scrap burdensome green regulations as part of trade negotiations amid U.S. pressure on non-tariff barriers.
  • Japan's April Tokyo CPI was up 3.5% yr/yr (last 2.9%). April Tokyo Core CPI was up 3.4% yr/yr (expected 3.2%; last 2.4%).
  • Singapore's Q1 URA Property Index rose 0.8% qtr/qtr (expected 0.6%; last 2.3%). March Industrial Production fell 3.6% m/m (expected 0.6%; last -2.9%) but was up 5.8% yr/yr (expected 8.1%; last 0.9%).
  • U.K.'s March Retail Sales grew 0.4% m/m (expected -0.3%; last 0.7%), rising 2.6% yr/yr (expected 1.8%; last 2.2%). March Core Retail Sales were up 0.5% m/m (expected -0.4%; last 0.7%), rising 3.3% yr/yr (expected 2.2%; last 1.8%). April GfK Consumer Confidence fell to -23 from -19 (expected -21).
  • France's April Business Survey improved to 99 from 96 (expected 96).
• Today's Data:
  • The final University of Michigan Index of Consumer Sentiment for April rose to 52.2 (Briefing.com consensus 48.5) from the preliminary reading of 50.8. The final reading for March was 57.0. In the same period a year ago, the index stood at 77.2.
    • The key takeaway from the report is that even with the small uptick relative to the preliminary April reading, consumer sentiment remains at levels last seen as the world emerged from the coronavirus pandemic. There was a slight moderation in year-ahead inflation expectations, but those expectations still increased nearly two percentage points from the final March reading.
• Commodities:
  • WTI crude: +0.4% to $63.04/bbl
  • Gold: -1.6% to $3297.60/ozt
  • Copper: -0.4% to $4.85/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1379
  • GBP/USD: UNCH at 1.3329
  • USD/CNH: UNCH at 7.2860
  • USD/JPY: +0.6% to 143.56
• The Week Ahead:
  • Monday: Nothing of note
  • Tuesday: Advance March International Trade in Goods (prior -$147.9 bln), advance March Retail Inventories (prior 0.1%), advance March Wholesale Inventories (prior 0.3%) at 8:30 ET; February FHFA Housing Price Index (prior 0.2%) and February S&P Case Shiller Home Price Index (Briefing.com consensus 4.7%; prior 4.7%) at 9:00 ET; April Consumer Confidence (Briefing.com consensus 88.3; prior 92.9) and March Job Openings (prior 7.568 mln) at 10:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -12.7%) at 7:00 ET; April ADP Employment Change (Briefing.com consensus 128,000; prior 77,000) at 8:15 ET; Q1 Employment Cost Index (Briefing.com consensus 0.9%; prior 0.9%), advance Q1 GDP (Briefing.com consensus 0.4%; prior 2.4%), advance Q1 GDP Deflator (Briefing.com consensus 3.1%; prior 2.3%), March Personal Income (Briefing.com consensus 0.4%; prior 0.8%), Personal Spending (Briefing.com consensus 0.4%; prior 0.4%), PCE Prices (Briefing.com consensus 0.0%; prior 0.3%), and Core PCE Prices (Briefing.com consensus 0.1%; prior 0.4%) at 8:30 ET; April Chicago PMI (Briefing.com consensus 46.0; prior 47.6) at 9:45 ET; March Pending Home Sales (Briefing.com consensus -0.2%; prior 2.0%) at 10:00 ET; and weekly crude oil inventories (prior +244,000) at 10:30 ET
  • Thursday: Weekly Initial Claims (Briefing.com consensus 225,000; prior 222,000) and Continuing Claims (prior 1.841 mln) at 8:30 ET; Final April S&P Global U.S. Manufacturing PMI (prior 50.2) at 9:45 ET; March Construction Spending (Briefing.com consensus 0.3%; prior 0.7%) and April ISM Manufacturing Index (Briefing.com consensus 47.9%; prior 49.0%) at 10:00 ET; and weekly natural gas inventories (prior +88 bcf) at 10:30 ET
  • Friday: April Nonfarm Payrolls (Briefing.com consensus 130,000; prior 228,000), Nonfarm Private Payrolls (Briefing.com consensus 125,000; prior 209,000), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.3%), Unemployment Rate (Briefing.com consensus 4.2%; prior 4.2%), and Average Workweek (Briefing.com consensus 34.2; prior 34.2) at 8:30 ET; and March Factory Orders (Briefing.com consensus 4.1%; prior 0.6%) at 10:00 ET