Bond Market Update

Retreat Extended Despite Steady Oil

• U.S. Treasuries extended their recent losses on Tuesday, lifting yields to fresh highs for the year with the 30-yr yield reaching a level not seen in almost 20 years. The market started the day on a slightly higher note after President Trump's acknowledgement that he delayed the next round of strikes on Iran due to a request from other Gulf nations. However, the delay was only seen as a small positive and did not prevent an intraday retreat even though crude oil essentially held near yesterday's settlement level. Treasuries settled a bit above lows that were notched in mid-morning trade with the 10-yr yield ending at a level last seen in mid-January. Today's economic data was limited to a Pending Home Sales report for April (1.4%; Briefing.com consensus 1.6%) that was a bit weaker than expected, while tomorrow's session will not feature any top-tier data. The U.S. Treasury will sell $16 bln in 20-yr bonds at 13:00 ET and the FOMC will release the Minutes from its April meeting at 14:00 ET.
• Yield Check:
  • 2-yr: +3 bps to 4.12%
  • 3-yr: +4 bps to 4.21%
  • 5-yr: +5 bps to 4.33%
  • 10-yr: +4 bps to 4.67%
  • 30-yr: +3 bps to 5.18%

• News:
  • The U.S. Treasury extended a temporary sanction waiver on Russian seaborne oil.
  • The EU's Economic Commissioner Dombrovskis said that G-7 has made progress on critical minerals.
  • Bank of England policymaker Breeden spoke about the potential benefits of tokenization. The EU is looking at ways to counter food inflation.
  • Japan's Q1 GDP expanded 0.5% qtr/qtr (expected 0.4%; prior 0.2%), growing 2.1% yr/yr (expected 1.7%; last 0.8%). Q1 GDP Price Index was up 3.4% yr/yr (expected 3.1%; prior 3.4%), GDP External Demand increased 0.3% qtr/qtr (expected 0.2%; prior 0.0%), GDP Capital Expenditure rose 0.3% qtr/qtr (expected 0.2% prior 1.4%), GDP Private Consumption rose 0.3% qtr/qtr (expected 0.2%; prior 0.0%). March Industrial Production was down 0.4% m/m (expected -0.5%; prior -2.0%) and Capacity Utilization fell 1.2% m/m (prior -0.1%). March Tertiary Industry Activity Index rose to 16.5 from -1.1 (expected -0.4).
  • Hong Kong's April Unemployment Rate remained at 3.7%.
  • Australia's May Westpac Consumer Sentiment was up 3.5% (prior -12.5%).
  • New Zealand's Q1 Input PPI was up 1.4% (expected 0.8%; prior -0.5%) and Output PPI was up 0.8% qtr/qtr (expected 0.5%; last 0.1%). April Electronic Card Retail Sales fell 1.3% m/m (prior 0.7%) but were up 2.0% yr/yr (last 2.7%).
  • Eurozone's March trade surplus reached EUR7.8 bln (expected EUR5.4 bln; prior EUR11.1 bln).
  • U.K.'s March three-month employment increased by 148,000 (expected 107,000; prior 25,000), March Unemployment Rate rose to 5.0% from 4.9% (expected 4.9%), March Average Earnings Index + Bonus rose 4.1% (expected 3.8%; prior 3.9%), and April Claimant Count increased by 26,500 (expected 23,100; prior 4,900). Q4 Labor Productivity was down 0.5% (prior -0.5%).
• Today's Data:
  • Pending Home Sales rose 1.4% month-over-month in April (Briefing.com consensus 1.6%) while the March increase was revised up to 1.7% from 1.5%.
• Commodities:
  • WTI crude: -0.2% to $108.59/bbl
  • Gold: -1.1% to $4510.50/ozt
  • Copper: -1.6% to $6.21/lb
• Currencies:
  • EUR/USD: -0.5% to 1.1605
  • GBP/USD: -0.2% to 1.3400
  • USD/CNH: +0.3% to 6.8160
  • USD/JPY: +0.2% to 159.04
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 1.7%)
  • 10:30 ET: Weekly crude oil inventories (prior -4.31 mln)
  • 14:00 ET: April FOMC Minutes
• Treasury Auctions:
  • 13:00 ET: $16 bln 20-yr Treasury bond auction results