Bond Market Update

 Treasuries Climb as Geopolitical Fears Turn to Hopes

• U.S. Treasuries are on track for a firmly higher start, making for an early continuation of this week's volatility. Treasury futures began climbing shortly after yesterday's cash close, adding to their gains as the night went on. The overnight advance in Treasury futures took place alongside gains in global equities and a rally in other sovereign debt amid growing hopes for a resolution to the Iran conflict. The market has been encouraged by reports of several cargo vessels traversing the Strait of Hormuz within the past 24 hours and indications that China's main shipping company resumed bookings for six nations in the Middle East. Crude oil, meanwhile, has fallen back below $90/bbl, revisiting yesterday's low. The overnight economic data flow was on the light side, which will remain the case during the U.S. session. The U.S. Treasury, however, will continue this week's note auction slate with a $70 bln 5-yr note sale at 13:00 ET. The U.S. Dollar Index is down 0.2% at 99.28.
• Yield Check:
  • 2-yr: -6 bps to 3.87%
  • 3-yr: -7 bps to 3.87%
  • 5-yr: -7 bps to 3.96%
  • 10-yr: -7 bps to 4.32%
  • 30-yr: -5 bps to 4.89%

• News:
  • There was some speculation that China's sovereign wealth fund will be allocating new money to U.S.-based managers like Blackstone and TPG.
  • Japan's Diplomatic Blue Book for 2026 downgraded the view of relations with China to strategic and mutually beneficial from "one of its most important."
  • European Central Bank President Lagarde said that the bank will not act before it has sufficient information.
  • European Central Bank policymaker Lane said that the market is expecting two big inflation readings in March and April before normalizing in the following months.
  • South Korea's March Consumer Confidence fell to 107.0 from 112.1.
  • Australia's February Monthly CPI Indicator slowed to 3.7% from 3.8% (expected 3.8%).
  • Germany's March ifo Business Climate Index fell to 86.4 from 88.4 (expected 86.2). March Current Assessment remained at 86.7 (expected 86.0) and Business Expectations fell to 86.0 from 90.2, as expected.
  • U.K.'s February CPI was up 0.4% m/m, as expected (last -0.5%), rising 3.0% yr/yr, as expected (last 3.0%). February Core CPI was up 0.6% m/m (expected 0.5%; last -0.6%), rising 3.2% yr/yr (expected 3.1%; last 3.1%). February Input PPI was up 0.8% m/m (expected 0.5%; last 0.3%) and Output PPI was down 0.5% m/m (expected 0.3%; last 0.0%). February House Price Index was up 1.3% yr/yr (expected 1.7%; last 1.9%).
  • Spain's February PPI fell 7.0% yr/yr (last -2.9%).
  • Swiss March ZEW Expectations fell to -35.0 from 9.8.
• Commodities:
  • WTI Crude: -5.6% to $87.22/bbl
  • Gold: +4.1% to $4581.30/ozt
  • Copper: +1.7% to $5.55/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1598
  • GBP/USD: UNCH at 1.3410
  • USD/CNH: +0.1% to 6.8995
  • USD/JPY: +0.2% to 158.91
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -10.5%; prior -10.9%)
  • 8:30 ET: Q4 Current Account Balance (Briefing.com consensus -$242.3 bln; prior -$226.4 bln) and February Import prices (prior 0.2%), Import Prices ex-oil (prior 0.5%), Export Prices (prior 0.6%), and Export Prices ex-agriculture (prior 0.7%)
  • 10:30 ET: Weekly crude oil inventories (prior +6.16 mln)
• Treasury Auctions:
  • 13:00 ET: $70 bln 5-yr Treasury note auction results