Bond Market Update

Bounce in Progress

• U.S. Treasuries are on track for a modestly higher start, pressuring yields from their highest closing levels of the year. Treasury futures climbed through the night, with attention centered on President Trump's visit to China. Today's meeting between President Trump and President Xi was pleasant by all accounts, and President Xi was invited for a State visit to the U.S. in September. The two sides will aim to build a constructive relationship of strategic stability and there was also an agreement that the Strait of Hormuz must remain an open route. The overnight rise in Treasury futures took place alongside gains in other sovereign debt while crude oil is little changed near $101/bbl. Today's economic data slate will include the release of April Retail Sales (Briefing.com consensus 0.4%; prior 1.7%) at 8:30 ET. The U.S. Dollar Index is up 0.1% at 98.57.
• Yield Check:
  • 2-yr: -3 bps to 3.96%
  • 3-yr: -4 bps to 3.99%
  • 5-yr: -4 bps to 4.09%
  • 10-yr: -4 bps to 4.44%
  • 30-yr: -4 bps to 5.01%

• News:
  • Japan sold 30-yr JGBs to solid demand.
  • Bank of Japan policymaker said that a rate hike should happen as quickly as possible.
  • South Korea's President Lee requested a bilateral currency swap line with the U.S. Treasury.
  • European Central Bank policymaker Kazaks said that the full impact of the Iran war on inflation is not visible yet and that the situation is a bit worse than the ECB's baseline scenario.
  • British Prime Minister Starmer could face an imminent leadership challenge, according to reports.
  • China's April New Loans were down CNY10.0 bln (expected CNY320.0 bln; last CNY2.99 trln), April outstanding loans grew 5.6% yr/yr (expected 5.8%; last 5.8%), and April total social financing reached CNY620.0 bln (expected CNY1.50 trln; last CNY5.23 trln).
  • Japan's April M2 Money Stock was up 2.3% yr/yr (expected 1.9%; last 2.0%).
  • India's April WPI Inflation was up 8.30% yr/yr (expected 4.40%; last 3.88%).
  • U.K.'s Q1 GDP expanded 0.6% qtr/qtr, as expected (last 0.2%), growing 1.1% yr/yr (expected 0.8%; last 1.0%). March GDP grew 0.3% m/m (expected -0.1%; last 0.4%), March Industrial Production was down 0.2% m/m, as expected (last 0.3%) and it was flat yr/yr (expected 0.2%; last -0.5%). March Manufacturing Production rose 1.2% m/m (expected -0.1%; last -0.2%), increasing 1.2% yr/yr (expected 0.0%; last -0.8%). March trade deficit reached GBP27.22 bln (expected deficit of GBP19.80 bln; last deficit of GBP22.80 bln). Q1 Business Investment was up 0.7% qtr/qtr (expected 1.1%; last -2.9%) but down 1.8% yr/yr (last 1.8%).
  • Spain's April CPI was up 0.4% m/m, as expected (last 1.2%), rising 3.2% yr/yr, as expected (last 3.4%). April Core CPI was up 2.8% yr/yr, as expected (last 2.9%).
• Commodities:
  • WTI Crude: -0.3% to $100.70/bbl
  • Gold: -0.1% to $4704.50/ozt
  • Copper: -0.7% to $6.634/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1702
  • GBP/USD: UNCH at 1.3513
  • USD/CNH: UNCH at 6.7834
  • USD/JPY: +0.1% to 157.95
• Data out Today:
  • 8:30 ET: April Retail Sales (Briefing.com consensus 0.4%; prior 1.7%), Retail Sales ex-auto (Briefing.com consensus 0.4%; prior 1.9%), weekly Initial Claims (Briefing.com consensus 208,000; prior 200,000), Continuing Claims (prior 1.766 mln), April Import Prices (prior 0.8%), Import Prices ex-oil (prior 0.6%), Export Prices (prior 1.6%), and Export Prices ex-oil (prior 1.7%)
  • 10:00 ET: March Business Inventories (Briefing.com consensus 0.3%; prior 0.4%)
  • 10:30 ET: Weekly natural gas inventories (prior +63 bcf)