Bond Market Update

Oil Pullback Offers Sentiment Boost

• U.S. Treasuries are on track for a higher start in most tenors while the long bond is expected to show some early relative weakness after outperforming yesterday. Treasury futures climbed shortly after yesterday's cash close, responding to President Trump's comments that the war with Iran could end quickly. Treasury futures reached highs around the start of the European session, followed by some recent backtracking. The advance in Treasury futures has coincided with a pullback in the price of oil and equity gains in Asia and Europe. The overnight newsflow included the release of China's latest trade balance report, which showed a smaller-than-expected trade surplus for February, though exports jumped 39.6% yr/yr. Exports to the U.S. were down almost 17% while exports to the EU and Southeast Asia grew 20%. Crude oil is back below $90/bbl while the U.S. Dollar Index is down 0.5% at 98.66.
• Yield Check:
  • 2-yr: -2 bps to 3.57%
  • 3-yr: -3 bps to 3.58%
  • 5-yr: -3 bps to 3.71%
  • 10-yr: -1 bp to 4.13%
  • 30-yr: +2 bps to 4.76%

• News:
  • European Central Bank policymaker Muller said that the likelihood of a rate hike has increased, but there is no need to rush to a decision.
  • China's February trade surplus reached $90.98 bln (expected surplus of $177.4 bln; last surplus of $114.1 bln) as imports grew 13.8% yr/yr (expected 6.3%; last 5.7%) and exports rose 39.6% yr/yr (expected 7.1%; last 6.6%).
  • Japan's Q4 GDP expanded 0.3% qtr/qtr (expected 0.1%; last -0.6%), growing 1.3% yr/yr (expected 0.2%; last -2.3%). Q4 GDP Price Index was up 3.4% yr/yr, as expected (last 3.4%). January Household Spending was down 2.5% m/m (expected 0.8%; last -2.2%), falling 1.0% yr/yr (expected 2.4%; last -2.6%). February Machine Tool Orders jumped 24.2% yr/yr (expected 25.3%; last 10.6%).
  • South Korea's Q1 GDP contracted 0.2% qtr/qtr (expected -0.3%; last 1.3%) but was up 1.6% yr/yr (expected 1.7%; last 1.8%).
  • Australia's Westpac Consumer Sentiment was up 1.2% m/m (last -2.6%). February NAB Business Confidence fell to -1 from 4 and February NAB Business Survey remained at 7. January Building Approvals were down 7.2% m/m, as expected (last -14.9%), falling 15.7% yr/yr (expected 8.1%; last 0.4%). January Private House Approvals rose 1.1% m/m, as expected (last 0.4%).
  • Germany's January trade surplus reached EUR21.2 bln (expected surplus of EUR15.4 bln; last surplus of EUR17.4 bln) as imports fell 5.9% m/m (last 1.3%) and exports decreased 2.3% m/m (last 3.9%).
  • France's January trade deficit reached EUR1.8 bln (expected deficit of EUR5.2 bln; last deficit of EUR4.3 bln) and January Current Account surplus reached EUR2.1 bln (last surplus of EUR100 mln).
• Commodities:
  • WTI Crude: -6.8% to $88.30/bbl
  • Gold: +1.7% to $5189.00/ozt
  • Copper: +1.1% to $5.912/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1645
  • GBP/USD: +0.1% to 1.3454
  • USD/CNH: -0.1% to 6.8747
  • USD/JPY: +0.1% to 157.78
• Data out Today:
  • 6:00 ET: February NFIB Small Business Optimism (actual 98.8; Briefing.com consensus 99.5; prior 99.3)
  • 10:00 ET: February Existing Home Sales (Briefing.com consensus 3.88 mln; prior 3.91 mln)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results