Bond Market Update

Flight to Safety

• U.S. Treasuries have found a bid in a somewhat confounding trade on the surface of things. The dollar is under pressure, and deficit concerns continue to swirl, yet Treasuries are being bought across the curve. The 10-yr note yield is back below 4.50%, and the 30-yr bond yield is under 5.00% again. The ostensible catalyst is a safe-haven trade in front of the holiday weekend, yet growth concerns have been heightened by an announcement from President Trump that he is recommending a 50% tariff on the EU, effective June 1, 2025, because trade talks between the U.S. and the EU are going nowhere. He also warned Apple (AAPL) that it will face a tariff of at least 25% if iPhones intended to be sold in the U.S. are not made in the U.S. Short-covering activity is presumably also playing a part in this morning's action. The U.S. Dollar Index is down 0.5% to 99.46. As a reminder, the Treasury market will have an early close at 2:00 p.m. ET today.
• Yield Check:
  • 2-yr: -8 bps to 3.92%
  • 3-yr: -10 bps to 3.88%
  • 5-yr: -10 bps to 4.01%
  • 10-yr: -9 bps to 4.46%
  • 30-yr: -7 bps to 4.99%

• News:
  • President Trump says in Truth Social Post that he is recommending a straight 50% tariff on EU starting June 1, 2025 because discussions with the EU are going nowhere
  • The Senate plans to make changes to the House-passed reconciliation bill, including more spending reductions, softened Medicaid language, and preservation of some green energy spending, according to Politico
  • President Trump's trade team is pushing Europe for unilateral tariff reductions to avoid an additional 20% tariff, according to FT
  • Boston Fed President Susan Collins (voting FOMC member) in interview suggests that there could be zero rate cuts this year, according to Barron's
  • U.S. and China officials hold a call and cite progress on trade talks. Both sides agreed to maintain communication, according to CNBC
  • Large banks exploring a joint stablecoin, according to The Wall Street Journal
  • President Trump warns Apple (AAPL) that it will have to pay a tariff of at least 25% if iPhones that will be sold in the U.S. are not made in the U.S.
  • Bank of England Governor Bailey said that more signs of receding inflation are needed in order to cut rates
  • European Central Bank policymakers Rehn and Stournaras spoke in favor of a rate cut in June
• Commodities:
  • WTI crude: +0.2% to $61.33/bbl
  • Gold: +0.9% to $3325.00/ozt
  • Copper: +0.8% to $4.72/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1310
  • GBP/USD: +0.5% to 1.3480
  • USD/CNH: -0.3% to 7.1846
  • USD/JPY: -1.0% to 142.60
• The Day Ahead:
  • 09:35 ET: Kansas City Fed President Schmid (FOMC voter)
  • 10:00 ET: April New Home Sales (Briefing.com consensus 679K; prior 724K)
  • 12:00 ET: Fed Governor Cook (FOMC voter)