Bond Market Update

Playing It Safe

• U.S. Treasuries continue to find some safe-haven interest as the uncertainty surrounding the Israel-Iran conflict, and the potential U.S. involvement in it, lingers. Press reports suggest President Trump is weighing options that range from a diplomatic solution to a U.S.-led strike on Iran. Iran, for its part, has warned that it will impose "irreparable damage" if the U.S. gets involved in the Israel conflict. Oil prices continue to perk up as well, with WTI crude futures topping $75.00/bbl this morning. Aside from this geopolitical flashpoint, market participants will also be turning their attention to some key economic data today, the FOMC decision and Summary of Economic Projections at 2:00 p.m. ET, and Fed Chair Powell's press conference at 2:30 p.m. ET.
• Yield check:
  • 2-yr: -1 bp to 3.94%
  • 3-yr: -1 bp to 3.89%
  • 5-yr: -1 bp to 3.97%
  • 10-yr: -2 bps to 4.37%
  • 30-yr: -2 bps to 4.87%
• News:
  • White House officials say the next 24-48 hours are critical to determine if a diplomatic solution with Iran is possible or if President Trump will order U.S. military action against Iran, according to ABC News
  • President Trump is moving away from diplomacy and toward U.S. involvement in Iran, according to Politico
  • President Trump considering a range of options, including US strike against Iran, according to WSJ
  • Iran preparing missiles for strikes on U.S. bases if U.S. enters the war. Iran could also mine the Strait of Hormuz, according to NY Times
  • President Trump spoke with Israeli Prime Minister Benjamin Netanyahu, according to Axios
  • A military official from Israel says it could strike the Fordow nuclear site on its own, according to WSJ
  • Senate passes legislation that establishes a regulatory framework for stablecoins. The legislation now heads to the House where Republicans are considering changes, according to Politico
  • The Trump administration aiming to ease capital rule involving Treasury trading, according to Bloomberg
  • Mexico President Claudia Sheinbaum Pardo says "I had a very good phone conversation with President Trump, who informed me that he left urgently yesterday due to the situation in the Middle East. We agreed to work together to soon reach an agreement on various issues that concern us today"
  • Japan's Prime Minister Ishiba said that he will seek a trade deal with the U.S. "until the final minute," adding that auto imports are a big point of disagreement
  • MBA Mortgage Applications INdex -2.6% wk/wk, with refinance applications down 2% and purchase applications down 3%
  • Sweden's Riksbank lowered its policy rate by 25 basis points to 2.00%
  • The Bank of England will announce its latest policy decision tomorrow, though a rate cut is not expected
• Commodities:
  • WTI crude: +0.4% to $75.10/bbl
  • Gold: -0.1% to $3402.90/toz
  • Copper: +0.4% to $4.83/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1500
  • GBP/USD: +0.1% to 1.3453
  • USD/CNH: flat at 7.1903
  • USD/JPY: -0.3% to 144.85
• The Day Ahead:
  • 07:00 ET: MBA Mortgage Applications Index (Actual -2.6%; prior 12.5%)
  • 08:30 ET: Initial Jobless Claims (Briefing.com consensus 253K; prior 248K) and Continuing Jobless Claims (prior 1956K)
  • 08:30 ET: May Housing Starts (Briefing.com consensus 1356K; prior 1361K) and Building Permits (Briefing.com consensus 1411K; prior 1412K)
  • 10:30 ET: EIA Crude Oil Inventories (prior -3.64M)
  • 12:00 ET: EIA Natural Gas Inventories (prior +109 bcf)
  • 14:00 ET: FOMC Rate Decision and Summary of Economic Projections
  • 16:00 ET: April Net Long-Term TIC Flows