Bond Market Update

Treasuries Steady Despite Elusive Peace Deal

• U.S. Treasuries began the week with modest gains across the curve as the market maintained some overall optimism even though U.S.-Iran negotiations failed to produce a peace deal over the weekend. The trading day started with modest losses after a night that saw general weakness in global equities and sovereign debt. Yields on JGBs of most tenors reached fresh cycle highs and crude oil climbed back above $100/bbl to start the week. However, the U.S. session saw a swift bounce off lows in Treasuries and a pullback in the price of oil. U.S. equities also had a good showing, overcoming their early losses with ease. The improvement in sentiment was owed to intraday reports that President Trump remains open to diplomacy with Iran, though the U.S. Navy is now engaged in a blockade of Iran's ports. Crude oil finished the day near $99/bbl after retreating from an overnight high near $105/bbl while the U.S. Dollar Index fell 0.3% to 98.36.
• Yield Check:
  • 2-yr: -2 bps to 3.78%
  • 3-yr: -2 bps to 3.80%
  • 5-yr: -2 bps to 3.92%
  • 10-yr: -2 bps to 4.30%
  • 30-yr: -1 bp to 4.90%

• News:
  • Japan's trade minister Akazawa said that tighter central bank policy could held with inflation.
  • China Securities Daily observed that demand for savings bonds has been hot, with many banks reaching their quotas quickly.
  • ANZ now expects the Reserve Bank of New Zealand to hike rates in July, September, and October.
  • South Korea's exports through the first ten days of April were up 36.7% yr/yr with chip exports jumping 152.0%.
  • Germany's economic ministry expects that high energy prices, supply issues, and economic pressures will persist for the remainder of the year.
  • Hungary will have a more EU-friendly government after a Sunday election unseated Prime Minister Orban's party.
  • Standard & Poor's affirmed the U.K.'s AA rating with a Stable outlook.
  • China's March New Loans reached CNY2.99 trln (expected CNY3.465 trln; last CNY900.0 bln), March outstanding loans grew 5.8% yr/yr (expected 5.9%; last 6.0%), and March total social financing reached CNY5.23 trln (expected CNY5.40 trln; last CNY2.38 trln).
  • India's March CPI was up 3.40% yr/yr (expected 3.48%; last 3.21%).
  • New Zealand's March Performance of Services Index hit 46.0 (last 47.6).
• Today's Data:
  • Existing home sales decreased 3.6% month-over-month in March to a seasonally adjusted annual rate of 3.98 million (Briefing.com consensus 4.01 million) from an upwardly revised 4.13 million (from 4.09 million) in February. Sales were down 1.0% on a year-over-year basis.
    • The key takeaway from the report is that existing home sales were pressured at the start of the peak selling period by higher mortgage rates, higher prices, limited inventory, lower consumer confidence, and softer job growth.
• Commodities:
  • WTI crude: +2.5% to $98.97/bbl
  • Gold: -0.4% to $4766.80/ozt
  • Copper: +1.9% to $5.99/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1758
  • GBP/USD: +0.3% to 1.3504
  • USD/CNH: -0.1% to 6.8174
  • USD/JPY: +0.1% to 159.34
• The Day Ahead:
  • 6:00 ET: March NFIB Small Business Optimism (Briefing.com consensus 98.0; prior 98.8)
  • 8:30 ET: March PPI (Briefing.com consensus 1.2%; prior 0.7%) and Core PPI (Briefing.com consensus 0.4%; prior 0.5%)