Bond Market Update

Long End Paces Continued Selling

• U.S. Treasuries retreated on Tuesday, continuing their plunge from Friday's highs with longer tenors leading the slide. The trading day started in the red after overnight action saw a surge in Japan's Nikkei (+6.0%) on expectations of a trade deal being forged with the Trump administration while other equity markets also rallied. There was ongoing hope that President Trump's tariff stance will be softened a bit since 70 countries have now expressed interest in negotiating, according to Treasury Secretary Bessent. While there is some hope that tariffs will eventually be reduced for many countries, there is still elevated uncertainty surrounding China. Overnight, China fixed its yuan midpoint at a level not seen since September 2023 while continued intraday pressure on offshore yuan sent it to a fresh record low against the dollar. Tonight, the tariff on imports from China will be increased to 104% at midnight after China retaliated with an additional tariff of its own. Treasuries climbed off their early lows through the rest of the morning but found renewed resistance after briefly rising past their opening levels. That resistance showed up after the U.S. Treasury sold $58 bln in 3-yr notes to weak demand. Interestingly, the 3-yr note did not drift too far away from its pre-auction level while 10s and 30s hit fresh lows ahead of the close. With today's selling, the 10-yr yield is now up a stunning 37-basis points off its low from Friday morning, reflecting the incredible volatility seen over the past few days. Corporate debt has not seen much respite with the iShares iBoxx Investment Grade Corporate Bond ETF (LQD 105.53, -1.13, -1.1%) falling toward its low from January (104.94) while the iShares iBoxx High Yield ETF (HYG 75.89, -0.21, -0.3%) ended with a loss after a failed run at yesterday's high (93.47). Crude oil settled at a fresh low for the year after giving up an early gain while the U.S. Dollar Index fell 0.3% to 102.94.
• Yield Check:
  • 2-yr: +1 bp to 3.74%
  • 3-yr: +2 bps to 3.76%
  • 5-yr: +7 bps to 3.91%
  • 10-yr: +11 bps to 4.26%
  • 30-yr: +12 bps to 4.72%

• News:
  • Italy's Prime Minister Meloni will meet with President Trump on April 17.
  • Italy has reportedly lowered its 2025 growth forecast to 0.6% from 1.2%, setting its outlook for 2026 growth between 0.7% and 0.8%.
  • The Reserve Bank of New Zealand confirmed Christian Hawkesby as acting governor ahead of tomorrow's rate decision, which could be a cut.
  • Japan's February Current Account surplus reached JPY2.32 trln (expected JPY2.74 trln; last JPY1.95 trln).
  • South Korea's February Current Account surplus reached $7.18 bln (last $2.94 bln).
  • Australia's April Westpac Consumer Sentiment was down 6.0% (last 4.0%). March NAB Business Confidence fell to -3 from -2 and Business Survey remained at 4.
  • New Zealand's Q1 NZIER Business Confidence increased to 19% from 16%.
  • France's February trade deficit reached EUR7.9 bln (expected deficit of EUR5.4 bln; last deficit of EUR6.5 bln) and February Current Account deficit reached EUR1.9 bln (last deficit of EUR1.3 bln).
• Today's Data:
  • The NFIB Small Business Optimism Index fell to 97.4 in March from 100.7 in February.
  • $58 bln 3-year Treasury note auction results (prior 12-auction average):
    • High yield: 3.784% (4.179%).
    • Bid-to-cover: 2.47 (2.60).
    • Indirect bid: 73.0% (65.5%).
    • Direct bid: 6.2% (18.7%).
• Commodities:
  • WTI crude: -1.6% to $59.71/bbl
  • Gold: +0.5% to $2989.20/ozt
  • Copper: -3.1% to $4.12/lb
• Currencies:
  • EUR/USD: +0.4% to 1.0958
  • GBP/USD: +0.6% to 1.2793
  • USD/CNH: +0.9% to 7.4066
  • USD/JPY: -0.9% to 146.32
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -1.6%)
  • 10:00 ET: February Wholesale Inventories (Briefing.com consensus 0.3%; prior 0.8%)
  • 10:30 ET: Weekly crude oil inventories (prior +6.17 mln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results