Bond Market Update

Selling Pressure Intensifies

• U.S. Treasuries are on track for another lower start with longer tenors remaining at the forefront of the selling. Treasury futures retreated during the first half of the night, hitting lows near the end of the Asian session. President Trump's reciprocal tariffs, including the 104% tariff on imports from China, went into effect overnight and did not draw an immediate response from China. However, recent reports indicate that China will raise tariffs on imports from the U.S. to 84%. There are growing expectations that President Trump will announce formal trade negotiations with Japan, Vietnam, and possibly the U.K. as soon as today, according to Fox Business. The ongoing weakness in longer tenors is putting the spotlight on a rapid tightening in 30-yr spreads as hedge funds scramble to raise cash. The market will not receive any top-tier data today, but all eyes will be on the U.S. Treasury's $39 bln 10-yr note sale at 13:00 ET with the market hoping to see at least decent demand for the benchmark tenor. Crude oil is falling to its lowest level since February 2021 while the U.S. Dollar Index is down 0.7% at 102.25.
• Yield Check:
  • 2-yr: +5 bps to 3.79%
  • 3-yr: +11 bps to 3.87%
  • 5-yr: +14 bps to 4.05%
  • 10-yr: +18 bps to 4.44%
  • 30-yr: +17 bps to 4.89%

• News:
  • The Reserve Bank of New Zealand lowered its official cash rate by 25 basis points to 3.50%, as expected.
  • The Reserve Bank of India lowered its policy rate by 25 basis points to 6.00%, as expected.
  • Citi reduced its forecast for 2025 growth in China to 4.2% from 4.7% due to low expectations for a deal with the United States.
  • Japan's March Household Confidence fell to 34.1 from 34.8 (expected 34.7) and March Machine Tool Orders rose 11.4% yr/yr (last 3.5%).
  • South Korea's March Unemployment Rate rose to 2.9% from 2.7%.
  • Australia's February Building Approvals were down 0.3% m/m, as expected (last 6.9%) and Private House Approvals rose 1.0% m/m, as expected (last 1.4%).
• Commodities:
  • WTI Crude: -7.2% to $55.33/bbl
  • Gold: +3.0% to $3080.10/ozt
  • Copper: +0.5% to $4.163/lb
• Currencies:
  • EUR/USD: +0.7% to 1.1036
  • GBP/USD: +0.2% to 1.2782
  • USD/CNH: -0.6% to 7.3810
  • USD/JPY: -1.0% to 144.76
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 20.0%; 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)
  • 14:00 ET: March FOMC Minutes
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results