Bond Market Update

Pressure Returns

• U.S. Treasuries started the week with a daylong slide that sent yields on 10s and 30s to their highest closing levels since mid-July while yields on shorter tenors settled near their highs from March. The market faced pressure from the start after a night that saw WTI crude open below $100/bbl, followed by a steady bounce that drove it to $107/bbl. Oil retreated from its early morning high, dipping below $103/bbl before the cash start in Treasuries, but the rest of the session saw a return to overnight highs in WTI crude while Treasuries remained pressured until noon, followed by a sideways drift near lows into the close. Today's volatility in oil, and subsequent selling in Treasuries, followed a series of Iran-related developments. President Trump said over the weekend that the U.S. will begin guiding some ships through the Strait of Hormuz and U.S. Central Command announced today that two ships were escorted through the Strait. There was also a report that Iran hit a U.S. warship with two missiles, but U.S. military officials denied the claim. Economic data released today was limited to a strong Factory Orders report for March (1.5%; Briefing.com consensus 0.5%) but the rest pf the week will bring more noteworthy reports, including April Nonfarm Payrolls (Briefing.com consensus 67,000; prior 178,000) on Friday morning. The U.S. Dollar Index rose 0.3% to 98.47 after bouncing off its April low (97.63).
• Yield Check:
  • 2-yr: +7 bps to 3.96%
  • 3-yr: +8 bps to 3.99%
  • 5-yr: +7 bps to 4.09%
  • 10-yr: +7 bps to 4.45%
  • 30-yr: +6 bps to 5.03%

• News:
  • The U.S. Treasury plans to borrow $189 bln in Q2, $79 bln above the initial estimate. Borrowing in Q3 is expected to reach $671 bln.
  • A senior Bank of Korea policymaker believes that the central bank should consider a rate hike, according to Yonhap.
  • Japan's Prime Minister Takaichi pledged to increase defense cooperation with Australia.
  • The European Central Bank's survey of professional forecasters raised the 2026 harmonized inflation forecast for the EU to 2.2% from 1.8% while the growth outlook was reduced to 1.0% from 1.2%.
  • European Central Bank policymaker De Guindos said that the war impact has not been fully reflected in economic data, but forward indicators point to a significant impact, while policymaker Rehn said that fast action will be needed if second-round inflation effects appear.
  • South Korea's April Manufacturing PMI hit 53.6 (last 52.6).
  • Singapore's April Manufacturing PMI hit 50.7 (last 50.5).
  • Australia's April MI Inflation Gauge was up 0.6% (last 1.3%) and April ANZ Job Advertisements decreased 0.8% (last -3.2%). March Building Approvals were down 10.5% m/m (expected -10.2%; last 31.0%) but up 9.0% yr/yr (last 16.1%). March Private House Approvals rose 0.9% m/m (last 2.0%).
  • India's April Manufacturing PMI hit 54.7 (expected 55.9; last 53.9).
  • Eurozone's April Manufacturing PMI hit 52.2, as expected (last 51.6). May Sentix Investor Confidence rose to -16.4 from -19.2 (expected -20.9).
  • Germany's April Manufacturing PMI hit 51.4 (expected 51.2; last 52.2).
  • Italy's April Manufacturing PMI hit 52.1 (expected 51.6; last 51.3).
  • France's April Manufacturing PMI hit 52.8, as expected (last 50.0).
  • Spain's April Manufacturing PMI hit 51.7 (expected 49.5; last 48.7).
  • Swiss April Manufacturing PMI hit 54.5 (expected 52.0; last 53.3).
• Today's Data:
  • Factory orders increased 1.5% month-over-month in March (Briefing.com consensus: 0.5%) following an upwardly revised 0.3% increase (from 0.0%) in February. Excluding transportation, factory orders increased 1.6% for the second straight month. Shipments of manufactured goods were up 1.4% after increasing 1.7% in February.
    • The key takeaway from the report is that factory order activity ramped up in March, driven by widespread strength that was punctuated by a big increase (3.4%) in new orders for nondefense capital goods excluding aircraft.
  • The Senior Loan Officer Opinion Survey for April showed tighter lending standards and no change in demand for commercial and industrial loans. Standards and demand for commercial real estate loans were little changed. Lending standards for household loans were unchanged while demand weakened a bit. Demand for credit card, auto, and other consumer loans also weakened.
• Commodities:
  • WTI crude: +4.4% to $106.28/bbl
  • Gold: -2.4% to $4534.10/ozt
  • Copper: -2.3% to $5.85/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1697
  • GBP/USD: -0.3% to 1.3541
  • USD/CNH: UNCH at 6.8303
  • USD/JPY: UNCH at 157.00
• The Day Ahead:
  • 8:30 ET: March Trade Balance (Briefing.com consensus -$60.3 bln; prior -$57.3 bln)
  • 9:45 ET: Final April S&P Global U.S. Services PMI (prior 51.3)
  • 10:00 ET: April ISM Non-Manufacturing Index (Briefing.com consensus 53.9%; prior 54.0%), February New Home Sales (prior 587,000), March New Home Sales (Briefing.com consensus 654,000; prior NA), and March Job Openings (prior 6.882 mln)

Losses Widened

• U.S. Treasuries have faced continued pressure, which lifted the 30-yr yield to its highest level since mid-July in morning trade while yields on shorter tenors are now just below their March highs with the 2-yr yield about six basis points below its March peak and the 10-yr yield just three basis points below its highest level from March. Today's selling comes amid ongoing worries about the passage of maritime traffic through the Strait of Hormuz, though U.S. Central Command announced that two ships were escorted through the Strait today. Equities have turned lower with the S&P 500 down 0.5%.
• Yield Check:
  • 2-yr: +8 bps to 3.97%
  • 3-yr: +8 bps to 3.99%
  • 5-yr: +8 bps to 4.10%
  • 10-yr: +7 bps to 4.45%
  • 30-yr: +6 bps to 5.03%

Data Recon

• Factory orders increased 1.5% month-over-month in March (Briefing.com consensus: 0.5%) following an upwardly revised 0.3% increase (from 0.0%) in February. Excluding transportation, factory orders increased 1.6% for the second straight month. Shipments of manufactured goods were up 1.4% after increasing 1.7% in February.
  • The key takeaway from the report is that factory order activity ramped up in March, driven by widespread strength that was punctuated by a big increase (3.4%) in new orders for nondefense capital goods excluding aircraft.
• Yield Check:
  • 2-yr: +4 bps to 3.93%
  • 3-yr: +4 bps to 3.95%
  • 5-yr: +4 bps to 4.06%
  • 10-yr: +4 bps to 4.42%
  • 30-yr: +4 bps to 5.01%

Opening Losses Extended

• U.S. Treasuries trade on their lows after spending the first two hours of action in a steady slide from their starting levels. The early selling has lifted the 30-yr yield past its March high to a level not seen since mid-July while yields on shorter tenors are revisiting their highs from the middle of last week. Equities are starting the week on a slightly lower note with the S&P 500 (-0.1%) holding a slim early loss.
• Yield Check:
  • 2-yr: +6 bps to 3.95%
  • 3-yr: +4 bps to 3.95%
  • 5-yr: +4 bps to 4.06%
  • 10-yr: +4 bps to 4.42%
  • 30-yr: +4 bps to 5.01%

 Short End Leads Early Selling

• U.S. Treasuries are on track for a lower start that will cut in to the market's gains from the past couple days. Treasury futures opened in positive territory on Sunday evening, before spending the rest of the night in a slow retreat alongside other sovereign debt. Meanwhile, crude oil opened below $100/bbl on Sunday evening but spent the rest of the night in a rise that produced a high just shy of $108/bbl during the past couple hours. Iran-related headlines remained in focus through the weekend. President Trump said that the U.S. will begin guiding some ships through the Strait of Hormuz, but Iran's military warned ships against approaching the Strait. Economic data released overnight featured mostly better-than-expected Manufacturing PMI readings from major economies while the U.S. session will only see the release of March Factory Orders (Briefing.com consensus 0.5%; prior 0.0%) at 10:00 ET. However, the latest Senior Loan Officer Opinion Survey from the New York Fed and Quarterly Refunding Financing Estimates from the Treasury will be released at 14:00 ET and 15:00 ET, respectively. Crude oil trades just below $104/bbl while the U.S. Dollar Index is up 0.2% at 98.38.
• Yield Check:
  • 2-yr: +3 bps to 3.92%
  • 3-yr: +3 bps to 3.94%
  • 5-yr: +3 bps to 4.05%
  • 10-yr: +2 bps to 4.40%
  • 30-yr: +2 bps to 4.99%

• News:
  • A senior Bank of Korea policymaker believes that the central bank should consider a rate hike, according to Yonhap.
  • Japan's Prime Minister Takaichi pledged to increase defense cooperation with Australia.
  • The European Central Bank's survey of professional forecasters raised the 2026 harmonized inflation forecast for the EU to 2.2% from 1.8% while the growth outlook was reduced to 1.0% from 1.2%.
  • European Central Bank policymaker De Guindos said that the war impact has not been fully reflected in economic data, but forward indicators point to a significant impact, while policymaker Rehn said that fast action will be needed if second-round inflation effects appear.
  • South Korea's April Manufacturing PMI hit 53.6 (last 52.6).
  • Singapore's April Manufacturing PMI hit 50.7 (last 50.5).
  • Australia's April MI Inflation Gauge was up 0.6% (last 1.3%) and April ANZ Job Advertisements decreased 0.8% (last -3.2%). March Building Approvals were down 10.5% m/m (expected -10.2%; last 31.0%) but up 9.0% yr/yr (last 16.1%). March Private House Approvals rose 0.9% m/m (last 2.0%).
  • India's April Manufacturing PMI hit 54.7 (expected 55.9; last 53.9).
  • Eurozone's April Manufacturing PMI hit 52.2, as expected (last 51.6). May Sentix Investor Confidence rose to -16.4 from -19.2 (expected -20.9).
  • Germany's April Manufacturing PMI hit 51.4 (expected 51.2; last 52.2).
  • Italy's April Manufacturing PMI hit 52.1 (expected 51.6; last 51.3).
  • France's April Manufacturing PMI hit 52.8, as expected (last 50.0).
  • Spain's April Manufacturing PMI hit 51.7 (expected 49.5; last 48.7).
  • Swiss April Manufacturing PMI hit 54.5 (expected 52.0; last 53.3).
• Commodities:
  • WTI Crude: +2.0% to $103.90/bbl
  • Gold: -1.6% to $4569.60/ozt
  • Copper: -1.5% to $5.894/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1697
  • GBP/USD: -0.2% to 1.3542
  • USD/CNH: UNCH at 6.8272
  • USD/JPY: +0.1% to 157.15
• Data out Today:
  • 10:00 ET: March Factory Orders (Briefing.com consensus 0.5%; prior 0.0%)
  • 14:00 ET: Senior Loan Officer Opinion Survey
  • 15:00 ET: Treasury Quarterly Refunding Financing Estimates