Bond Market Update

Little Changed Despite Bumpy Session

• U.S. Treasuries endured some Thursday volatility that produced a modest loss in the long bond while 5s and shorter tenors eked out slim gains. The market was caught in a cross-current, starting the day with some renewed worries that the U.S.-Iran ceasefire might not hold due to Israel's continued attacks on Hezbollah targets in Lebanon. Treasuries backed off their starting levels in mid-morning trade, cutting into the remainder of their gains from yesterday. However, the entire complex bounced in the late morning, responding to reports that Israel will start negotiations with Lebanon. That bounce lifted Treasuries into the green with the market notching highs shortly after today's $22 bln 30-yr bond reopening, which met decent, but unimpressive demand. The final 90 minutes of trade saw some renewed selling that returned most tenors to their starting levels amid continued unease about the fluid nature of the Iran conflict. The ongoing focus on the conflict overshadowed the release of a Personal Income/Outlays report for February, which showed an unexpected drop in Personal Income (-0.1%; Briefing.com consensus 0.5%) and just a slight deceleration in the Core PCE Price Index to 3.0% from 3.1% year-over-year. Crude oil settled near $100/bbl while the U.S. Dollar Index fell 0.3% to 98.82.
• Yield Check:
  • 2-yr: -1 bp to 3.78%
  • 3-yr: UNCH at 3.81%
  • 5-yr: -1 bp to 3.92%
  • 10-yr: UNCH at 4.29%
  • 30-yr: +1 bp to 4.90%

• News:
  • Reserve Bank of New Zealand Governor Breman continues expecting the Kiwi economy to grow in 2026.
  • G7 finance ministers will meet in Washington this weekend.
  • The Bank of England's Financial Stability Board noted that some stresses may be emerging in private credit. 
  • The Bank of England's credit conditions survey showed that availability of credit to households increased in Q1 and is expected to increase again in Q2.
  • Japan's March Household Confidence fell to 33.3 from 39.7 (expected 38.3) and March Machine Tool Orders jumped 28.1% yr/yr (last 24.2%).
  • Hong Kong's March FX Reserves reached $430.80 bln (last $439.30 bln).
  • Germany's February trade surplus reached EUR19.8 bln (expected surplus of EUR18.1 bln; last surplus of EUR20.3 bln) as imports grew 4.7% m/m (expected 4.0%; last -5.1%) and exports rose 3.6% m/m (expected 1.0%; last -1.5%).
  • Spain's February Industrial Production fell 1.1% yr/yr (expected 1.5%; last -0.2%).
• Today's Data:
  • Initial jobless claims for the week ending April 4 increased by 16,000 to 219,000 (Briefing.com consensus: 215,000). Continuing jobless claims for the week ending March 28 decreased by 38,000 to 1.794 million.
    • The key takeaway from the report is that continuing claims hit their lowest level since May 11, 2024.
  • The third estimate for Q4 GDP checked in at 0.5% (Briefing.com consensus: 0.7%) versus the second estimate of 0.7%. The revision primarily reflected a downward revision to investment. The GDP Deflator was 3.7% (Briefing.com consensus: 3.8%) versus the second estimate of 3.8%.
    • The key takeaway from the report is that it suggests the economy closed last year on a sluggish note; however, it wasn't quite as soft as it appears when taking into account that real final sales to private domestic purchasers were up 1.8%.
  • Personal income decreased 0.1% month-over-month in February (Briefing.com consensus: 0.5%) following a 0.4% increase in January. Personal spending rose 0.5% (Briefing.com consensus: 0.6%) following a downwardly revised 0.3% (from 0.4%) in January. The PCE Price Index jumped 0.4% (Briefing.com consensus: 0.4%) after rising 0.3% in January and was up 2.8% year-over-year, unchanged from January. The core PCE Price Index also rose 0.4% (Briefing.com consensus: 0.3%) on the heels of a 0.4% increase in January and was up 3.0% year-over-year versus 3.1% in January.
    • The key takeaway from the report is that it reflects sticky inflation pressure before the Iran war started, so it won't sway the Fed from sticking with a wait-and-see policy stance.
  • Wholesale Inventories increased by 0.8% in February (Briefing.com consensus -0.2%) after decreasing by 0.3% in January.
  • Weekly natural gas inventories increased by 50 bcf after increasing by 36 bcf a week ago.
  • $22 bln 30-year Treasury bond reopening results (prior 12-auction average):
    • High yield: 4.876% (4.790%).
    • Bid-to-cover: 2.39 (2.40).
    • Indirect bid: 64.1% (64.0%).
    • Direct bid: 24.2% (24.0%).
• Commodities:
  • WTI crude: +3.7% to $97.89/bbl
  • Gold: +0.9% to $4817.10/ozt
  • Copper: -0.4% to $5.76/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1699
  • GBP/USD: +0.3% to 1.3432
  • USD/CNH: UNCH at 6.8293
  • USD/JPY: +0.3% to 159.03
• The Day Ahead:
  • 8:30 ET: March CPI (Briefing.com consensus 0.7%; prior 0.3%) and Core CPI (Briefing.com consensus 0.3%; prior 0.2%)
  • 10:00 ET: February Factory Orders (Briefing.com consensus 0.5%; prior 0.1%) and preliminary April University of Michigan Consumer Sentiment (Briefing.com consensus 52.0; prior 53.3)
  • 14:00 ET: March Treasury Budget (Briefing.com consensus -$160.0 bln; prior -$307.5 bln)