Bond Market Update

Pressured Ahead of April CPI

• U.S. Treasuries are on track for an early extension of yesterday's losses, though the market could see some volatility in reaction to the 8:30 ET release of April CPI (Briefing.com consensus 0.6%) and Core CPI (Briefing.com consensus 0.4%). Treasury futures faced some overnight pressure as oil climbed back above $100/bbl while other sovereign debt also retreated. Gilts were at the forefront of the overnight selling, lifting the U.K.'s 10-yr yield toward 5.35%, a level not seen since 2008. The selling was driven by speculation about looser fiscal policy from the next government, though Prime Minister Starmer has maintained that he will not quit even though more than 81 Labour MPs and six cabinet ministers have made public calls for his resignation since the local election drubbing. Crude oil hovers above $101/bbl while the U.S. Dollar Index is up 0.3% at 98.24.
• Yield Check:
  • 2-yr: +3 bps to 3.98%
  • 3-yr: +3 bps to 4.00%
  • 5-yr: +3 bps to 4.10%
  • 10-yr: +2 bps to 4.43%
  • 30-yr: +1 bp to 5.00%

• News:
  • Treasury Secretary Bessent met with top Japanese officials today, repeating that excess volatility in currency markets is undesirable.
  • South Korea's policy chief said that a dividend should be paid to citizens from taxes on AI profits.
  • The Bank of Japan's Summary of Opinions from the April meeting showed that most policymakers remain open to a hike, but the timing of the next increase has become more uncertain.
  • Alphabet (GOOG) will sell yen-denominated bonds with different tenors in multiple tranches.
  • European Central Bank policymaker Nagel repeated that the base scenario calls for two rate hikes from the central bank.
  • Japan's March Household Spending was down 1.3% m/m (expected 0.6%; last 1.5%), falling 2.9% yr/yr (expected -1.4%; last -1.8%). March Leading Index rose to 114.5 from 113.2 (expected 114.4) and Coincident Indicator was up 0.3% m/m (last -1.7%).
  • Australia's April NAB Business Survey fell to 3 from 6 and NAB Business Confidence rose to -24 from -29.
  • India's April CPI was up 3.48% yr/yr (expected 3.80%; last 3.40%).
  • Eurozone's May ZEW Economic Sentiment rose to -9.1 from -20.4 (expected -21.6).
  • Germany's April CPI was up 0.6% m/m, as expected (last 1.1%), rising 2.9% yr/yr, as expected (last 2.7%). May ZEW Economic Sentiment rose to -10.2 from -17.2 (expected -19.2) and ZEW Current Conditions fell to -77.8 from -73.7 (expected -77.5).
  • Italy's March Industrial Production was up 0.7% m/m (expected 0.2%; last 0.2%), rising 1.5% yr/yr (last 0.4%).
  • Swiss April PPI was up 0.8% m/m (expected 0.4%; last 0.2%) but down 2.0% yr/yr (last -2.7%).
• Commodities:
  • WTI Crude: +3.3% to $101.26/bbl
  • Gold: -0.3% to $4711.80/ozt
  • Copper: +0.5% to $6.49/lb
• Currencies:
  • EUR/USD: -0.3% to 1.1744
  • GBP/USD: -0.5% to 1.3538
  • USD/CNH: UNCH at 6.7923
  • USD/JPY: +0.3% to 157.53
• Data out Today:
  • 6:00 ET April NFIB Small Business Optimism (actual 95.9; Briefing.com consensus 96.1; prior 95.8)
  • 8:30 ET: April CPI (Briefing.com consensus 0.6%; prior 0.9%) and Core CPI (Briefing.com consensus 0.4%; prior 0.2%)
  • 14:00 ET: April Treasury Budget (Briefing.com consensus $202.5 bln; prior -$164.1 bln)
• Treasury Auctions:
  • 13:00 ET: $42 bln 10-yr Treasury note auction results