Bond Market Update

Long End Resists Continued Pressure

• U.S. Treasuries started the new week with a continuation of the recent volatility, but an intraday bounce saved the long bond from another lower finish while 5s and shorter tenors added to last week's losses. The trading day started with pressure across the curve after an overnight session that saw big losses in Asian equity markets and general weakness in sovereign debt stemming from an extension of the sharp rally in the price of oil. WTI crude charged out of the gate on Sunday evening, rallying past $100/bbl to a high of $119.48 before pulling back. The rally to levels not seen since mid-2022 was owed to ongoing worries that the Iran conflict could turn into a costly prolonged war, but speculation about a joint reserve release by G7 nations helped improve sentiment after a poor start on Sunday night. The lower start in Treasuries lifted yields back to highs from Friday, but the market found support not long after G7 ministers concluded their call without an official agreement on a reserve release, but with another virtual meeting scheduled for tomorrow. Treasuries climbed above their opening levels in the late morning, holding just below their rebound highs into the close. The New York Fed's Survey of Consumer Expectations for February offered some mild support, showing a ten-basis point dip in year-ahead inflation expectations to 3.0% while three- and five-year expectations remained at 3.0%. Crude oil finished near $95/bbl after falling nearly $25/bbl from its overnight high while the U.S. Dollar Index rose 0.2% to 99.15.
• Yield Check:
  • 2-yr: +3 bps to 3.59%
  • 3-yr: +3 bps to 3.61%
  • 5-yr: +2 bps to 3.74%
  • 10-yr: UNCH at 4.14%
  • 30-yr: -2 bps to 4.74%

• News:
  • China's February CPI was up 1.0% m/m (last 0.2%), rising 1.3% yr/yr (expected 0.9%; last 0.2%). February PPI was down 0.9% yr/yr (expected -1.1%; last -1.4%).
  • Japan's January Overall Wage Income increased 3.0% yr/yr (expected 2.5%; last 2.4%). January Leading Index rose to 112.4 from 110.3 (expected 113.0) and January Coincident Indicator was up 2.5% m/m (last -0.5%).
  • Eurozone's March Sentix Investor Confidence fell to -3.1 from 4.2, as expected.
  • Germany's January Factory Orders were down -11.1% m/m (expected -4.2%; last 6.4%). January Industrial Production fell 0.5% m/m (expected 1.0%; last -1.0%), dropping 1.1% yr/yr (last 0.4%).
  • Swiss February SECO Consumer Climate remained at -30 (expected -29).
• Commodities:
  • WTI crude: +4.3% to $94.73/bbl
  • Gold: -0.9% to $5112.50/ozt
  • Copper: +0.3% to $5.83/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1584
  • GBP/USD: -0.2% to 1.3394
  • USD/CNH: +0.1% to 6.9090
  • USD/JPY: +0.4% to 158.34
• The Day Ahead:
  • 6:00 ET: February NFIB Small Business Optimism (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