Bond Market Update

Yields Return to 2026 Highs

• U.S. Treasuries continued this week's volatility with a Thursday slide that left yields on the 10-yr note and shorter tenors at their highest closing levels of the year. The trading day started with sharp losses after a steady overnight retreat in the futures market alongside other sovereign debt. Yesterday's Iran-related optimism largely waned with the market turning its focus back to another day of elevated energy prices that got a bit higher with WTI crude rising back toward $95/bbl while Brent crude climbed back above $100/bbl. Treasuries attempted an early bounce with the long bond leading the short-lived recovery that found resistance in the late morning and was followed by a steady slide to fresh lows. Treasuries reached their worst levels shortly after today's $44 bln 7-yr note auction met weak demand, making for the third consecutive disappointing auction of this week. The U.S. Dollar Index climbed 0.3% to 99.90 with its March high (100.54) looming above.
• Yield Check:
  • 2-yr: +10 bps to 3.98%
  • 3-yr: +11 bps to 3.99%
  • 5-yr: +13 bps to 4.10%
  • 10-yr: +9 bps to 4.42%
  • 30-yr: +4 bps to 4.94%

• News:
  • Japan will announce a provisional budget for fiscal 2026 tomorrow with the amount expected to reach JPY8.6 trln.
  • South Korea will stabilize its bond market with excess tax revenue.
  • European Central Bank policymaker Nagel said that a rate hike in April is an option.
  • French Economy Minister Lescure hinted at incoming measures to offset high oil prices.
  • Japan's February Corporate Services Price Index was up 2.7% yr/yr (expected 2.6%; last 2.6%) and January BoJ Core CPI was up 2.2% yr/yr (expected1.6%; last 2.3%).
  • Hong Kong's February trade deficit reached HKD64.2 bln (last deficit of HKD14.1 bln) as imports jumped 29.9% m/m (last 38.1%) and exports rose 24.7% m/m (last 33.8%).
  • Singapore's February Industrial Production was down 7.2% m/m (last 2.0%), slipping 0.1% yr/yr (last 12.9%).
  • Eurozone's February M3 Money Supply grew 3.0% yr/yr (expected 3.3%; last 3.3%), February Private Sector Loans increased 3.0% yr/yr (expected 3.1%; last 3.0%), and February Loans to nonfinancials rose 2.9% yr/yr (last 2.8%).
  • Germany's April GfK Consumer Climate fell to -28.0 from -24.8 (expected -27.3). 
  • France's March Business Survey fell to 99 from 102 (expected 100) and Consumer Confidence fell to 89 from 91, as expected.
  • Italy's March Consumer Confidence fell to 92.6 from 97.4 and Business Confidence rose to 88.8 from 88.5.
  • Spain's Q4 GDP expanded 0.8% qtr/qtr, as expected (last 0.6%), growing 2.7% yr/yr (expected 2.6%; last 2.7%).
• Today's Data:
  • Initial jobless claims for the week ending March 21 rose by 5,000 to 210,000 (Briefing.com consensus: 210,000), while continuing jobless claims decreased by 32,000 to 1.819 million, which is the lowest level since May 25, 2024.
    • The key takeaway from the report is that it is not indicative of a weak labor market, particularly with initial jobless claims—a leading indicator—continuing to run at historically low levels.
  • Weekly natural gas inventories decreased by 54 bcf after increasing by 35 bcf a week ago.
  • $44 bln 7-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.255% (3.988%).
    • Bid-to-cover: 2.43 (2.53).
    • Indirect bid: 62.6% (64.2%).
    • Direct bid: 25.0% (25.2%).
• Commodities:
  • WTI crude: +4.5% to $94.43/bbl
  • Gold: -3.8% to $4378.90/ozt
  • Copper: -1.6% to $5.47/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1529
  • GBP/USD: -0.3% to 1.3325 
  • USD/CNH: +0.3% to 6.9216
  • USD/JPY: +0.3% to 159.80
• The Day Ahead:
  • 10:00 ET: Final March University of Michigan Consumer Sentiment (Briefing.com consensus 55.5; prior 55.5)