Bond Market Update

 Testing Recent Rebound

• U.S. Treasuries are on track for a lower start that will cut into the market's gains from earlier this week. Treasury futures retreated alongside other sovereign debt overnight, responding to President Trump's address to the Nation. The president discussed the Iran campaign in his speech, saying that another barrage of attacks is planned for the coming weeks and that countries that receive cargo shipped through the Strait of Hormuz should make an effort to keep the route safe. The market hoped yesterday to hear a more conciliatory tone from the U.S. commander-in-chief, so a good chunk of Thursday's optimism has faded. Crude oil has jumped back toward $110/bbl while the U.S. Dollar Index is up 0.6% at 100.23.
• Yield Check:
  • 2-yr: +5 bps to 3.85%
  • 3-yr: +4 bps to 3.87%
  • 5-yr: +4 bps to 4.00%
  • 10-yr: +5 bps to 4.37%
  • 30-yr: +4 bps to 4.94%

• News:
  • President Trump is expected to issue executive orders pertaining to steel and aluminum tariffs this afternoon.
  • Japan sold 10-yr JGBs to weak demand, sending the 10-yr yield to a level not seen in more than 20 years.
  • Foreign investors sold Japanese equities and JGBs aggressively into Japan's fiscal year end.
  • China will increase its reserves of frozen pork after hog prices reached an eight-year low.
  • China Securities Journal noted that the issuance of yuan-denominated bonds by foreign entities doubled in Q1.
  • Bank of England Governor Bailey cautioned against pricing in rate hikes while the European Central Bank is expected to hike rates a couple times, creating a divergence in the region's rate expectations.
  • Japan's March Monetary Base was down 11.6% yr/yr (expected -10.8%; last -10.6%).
  • South Korea's March CPI was up 0.3% m/m (expected 0.6%; last 0.3%), rising 2.2% yr/yr (expected 2.4%; last 2.0%).
  • Australia's February trade surplus reached AUD5.69 bln (expected surplus of AUD2.81 bln; last surplus of AUD2.26 bln) as imports fell 3.2% m/m (last 1.0%) and exports rose 4.9% m/m (last -1.6%).
  • India's March Manufacturing PMI hit 53.9 (expected 53.8; last 56.9).
  • France's February government budget deficit reached EUR32.1 bln (last deficit of EUR9.7 bln).
  • Italy's February Retail Sales were unchanged m/m (expected 0.3%; last 0.6%), rising 1.6% yr/yr (last 2.5%). 
  • Swiss March CPI was up 0.2% m/m (expected 0.5%; last 0.6%), rising 0.3% yr/yr (expected 0.5%; last 0.1%).
• Commodities:
  • WTI Crude: +9.3% to $109.41/bbl
  • Gold: -3.9% to $4624.20/ozt
  • Copper: -2.2% to $5.523/lb
• Currencies:
  • EUR/USD: -0.6% to 1.1516
  • GBP/USD: -0.9% to 1.3195
  • USD/CNH: +0.4% to 6.9029
  • USD/JPY: +0.6% to 159.72
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 215,000; prior 210,000), Continuing Claims (prior 1.819 mln), and February Trade Balance (Briefing.com consensus -$55.8 bln; prior -$54.5 bln)
  • 10:30 ET: Weekly natural gas inventories (prior -54 bcf)