Bond Market Update

Treasuries Continue Licking March Wounds

• U.S. Treasuries ended March on a higher note, continuing Friday's rebound off 2026 lows. The Tuesday advance was paced by shorter tenors while the long end resisted, ending with just a slim gain. Treasuries opened with gains across the curve after a night that featured a torrent of month-end data from major economies. However, surprises were limited despite the barrage. China's official Manufacturing (50.4) and Non-Manufacturing (50.1) PMI readings returned to expansion in March while economic data from Europe showed weak February Consumer Spending in France (-1.4% m/m; expected -0.3%) and cooler than expected flash March CPI from the eurozone (2.5% yr/yr; expected 2.6%). More notably, the market was focused and encouraged by President Trump's comments that he is considering ending the Iran war without reopening the Strait of Hormuz. Later in the day, it was reported that Iran's president signaled willingness to end the war if his country receives guarantees against additional attacks. That midday revelation prompted a jump to fresh highs in Treasuries and equities while oil gave back its gain, though it still ended the pit session above $100/bbl, jumping $34, or 50.8%, for the month. As for Treasuries, even with today's gains, they recorded big losses for the month with the 2-yr yield jumping 42 basis points while the 10-yr yield increased by 35 basis points as rate cut expectations plummeted. The U.S. Dollar Index fell 0.6% to 99.92, narrowing its March advance to 2.3%.
• Yield Check:
  • 2-yr: -3 bps to 3.80% (+42 bps in March; +32 bps in Q1)
  • 3-yr: -4 bps to 3.82% (+44 bps in March; +28 bps in Q1)
  • 5-yr: -3 bps to 3.95% (+44 bps in March; +22 bps in Q1)
  • 10-yr: -3 bps to 4.31% (+35 bps in March; +14 bps in Q1)
  • 30-yr: -1 bp to 4.89% (+26 bps in March; +4 bps in Q1)

• News:
  • Iran's Revolutionary Guard has threatened to begin targeting U.S. companies in the Middle East starting tomorrow.
  • China's liquor giant Kweichow Moutai announced price hikes.
  • South Korea is planning an extra budget of KRW26.2 trln to offset the impact of the war with Iran.
  • Germany's Economic Institutes lowered their domestic growth outlook for 2026 to 0.6% from 1.3% while the forecast for 2027 was reduced to 0.9% from 1.4%. The inflation forecast for 2026 was increased to 2.8% from 2.0% while the outlook for 2027 was increased to 2.8% from 2.3%.
  • European Central Bank policymaker Muller said that it is probable that rates will have to rise in the coming quarters while policymaker Kazimir said that the central bank will need to act decisively if the Iran war drags on.
  • China's March Manufacturing PMI hit 50.4 (expected 50.1; last 49.0) and Non-Manufacturing PMI hit 50.1 (expected 49.9; last 49.5).
  • Japan's February Retail Sales were down 0.2% yr/yr (expected 0.9%; last 1.8%), February Industrial Production fell 2.1% m/m, as expected (last 4.3%), February Unemployment Rate dipped to 2.6% from 2.7% (expected 2.7%), March Tokyo CPI was up 1.4% yr/yr (last 1.6%) and March Tokyo Core CPI was up 1.7% yr/yr (expected 1.8%; last 1.8%). February Housing Starts fell 4.9% yr/yr (expected -4.5%; last -0.4%) and Construction Orders were up 42.7% yr/yr (last 5.7%).
  • South Korea's February Retail Sales were unchanged m/m (last 2.9%). February Industrial Production rose 5.4% m/m (expected 1.8%; last -2.4%) but was down 2.2% yr/yr (expected 6.0%; last 6.8%). February Service Sector Output rose 0.5% m/m (last -0.2%).
  • India's Q3 trade deficit reached $87.40 bln (last deficit of $93.60 bln).
  • Singapore's February Bank Lending reached SGD893.6 bln (last SGD887.5 bln).
  • Australia's March Private Sector Credit rose 0.6% m/m, as expected (last 0.5%) and March Housing Credit was up 0.6% m/m (last 0.6%).
  • New Zealand's March ANZ Business Confidence fell to 32.5 from 59.2.
  • Eurozone's flash March CPI was up 1.2% m/m (last 0.6%), rising 2.5% yr/yr (expected 2.6%; last 1.9%). March Core CPI was up 0.8% m/m (last 0.8%), rising 2.3% yr/yr (expected 2.4%; last 2.4%).
  • Germany's February Retail Sales rose 0.7% yr/yr (expected 1.0%; last 0.9%). February Import Price Index was up 0.3% m/m (expected 0.7%; last 1.1%) but down 2.3% yr/yr (last -2.3%). March Unemployment was unchanged (expected 2,000; last 1,000) and March Unemployment Rate remained at 6.3%, as expected.
  • U.K.'s Q4 GDP expanded 0.1% qtr/qtr, as expected (last 0.1%), growing 1.0% yr/yr, as expected (last 1.2%). Q4 Business Investment was down 2.5% qtr/qtr (expected -2.7%; last 1.1%), Q4 Current Account deficit reached GBP18.4 bln (expected deficit of GBP24.0 bln; last deficit of GBP10.7 bln). March Nationwide HPI was up 0.9% m/m (expected 0.0%; last 0.3%), rising 2.2% yr/yr (last 1.0%). Q4 Business Investment was up 2.0% yr/yr, as expected (last 3.5%).
  • France's flash March CPI was up 0.9% m/m, as expected (last 0.6%), rising 1.7% yr/yr (expected 1.6%; last 0.9%). February PPI was down 0.2% m/m, as expected (last 0.5%), falling 2.4% yr/yr (last -2.3%). February Consumer Spending was down 1.4% m/m (expected -0.3%; last 0.4%).
  • Italy's flash March CPI was up 0.5% m/m (expected 0.6%; last 0.7%), rising 1.7% yr/yr (last 1.5%). January Industrial Sales fell 0.3% m/m (last 0.6%), dropping 1.0% yr/yr (last 3.5%).
  • Spain's January Current Account surplus reached EUR2.73 bln (last surplus of EUR1.80 bln).
• Today's Data:
  • The Conference Board's Consumer Confidence Index increased to 91.8 in March (Briefing.com consensus: 88.0) from 91.2 in February. In the same period a year ago, the index stood at 93.9.
    • The key takeaway from the report is that the headline numbers don't convey any abject concern among consumers about the Iran war, yet that concern showed up in higher 12-month inflation expectations, which jumped to 6.2% from 5.5% in February, marking the highest level since August 2025.
  • The Chicago PMI hit 52.8 in March (Briefing.com consensus 54.8), down from 57.7 in February.
  • The FHFA Housing Price Index was up 0.1% m/m (Briefing.com consensus 0.0%) in January after increasing a revised 0.3% (from 0.1%) in December.
  • The S&P Case-Shiller Home Price Index was up 1.2% year-over-year (Briefing.com consensus 1.3%) in January after increasing 1.4% in December.
  • Job openings decreased to 6.882 million in February (Briefing.com consensus 6.795 million) from a revised 7.240 million (from 6.946 million) in January.
• Commodities:
  • WTI crude: -1.7% to $101.15/bbl
  • Gold: +2.7% to $4679.50/ozt
  • Copper: +2.0% to $5.61/lb
• Currencies:
  • EUR/USD: +0.7% to 1.1541
  • GBP/USD: +0.4% to 1.3225
  • USD/CNH: -0.4% to 6.8899
  • USD/JPY: -0.5% to 158.96
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -10.5%)
  • 8:15 ET: March ADP Employment Change (Briefing.com consensus 42,000; prior 63,000)
  • 8:30 ET: February Retail Sales (Briefing.com consensus 0.5%; prior -0.2%) and Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.0%) · 9:45 ET: Final March S&P Global U.S. Manufacturing PMI (prior 52.4)
  • 10:00 ET: March ISM Manufacturing (Briefing.com consensus 52.3%; prior 52.4%)
  • 10:30 ET: Weekly crude oil inventories (prior +6.93 mln)