Bond Market Update

Yields Hit Fresh 2024 Highs

• U.S. Treasuries ended Tuesday on a mostly lower note with longer tenors adding to yesterday's sharp losses while the short end finished slightly higher. The trading day started with losses in most tenors, lifting yields on the 5-yr note and longer tenors to fresh highs for the year. The lower start followed continued overnight strength in commodities like gold, copper, and oil, but the market found support quickly, rising past the day's starting levels in late morning trade. The 2-yr note made it into positive territory shortly after the start while longer tenors spent the bulk of the session in a sideways range after returning to their opening levels. There was no market-moving data in the U.S., but overnight trade saw the release of above-consensus final Manufacturing PMI readings from Germany, France, Spain, Italy, and the U.K., though readings from Germany and France pointed to an ongoing contraction while Italy and the U.K. rejoined Spain in expansionary territory. Tomorrow's session will also be quiet on the domestic data front, but several Fed officials are scheduled to speak, including Chairman Powell at 12:10 ET. Crude oil reached its best level since late October while the U.S. Dollar Index slipped 0.2% to 104.81.
• Yield Check:
  • 2-yr: -2 bps to 4.70%
  • 3-yr: UNCH at 4.52%
  • 5-yr: +2 bps to 4.35%
  • 10-yr: +4 bps to 4.37%
  • 30-yr: +4 bps to 4.51%

• News:
  • Cleveland Fed President (FOMC voter) Mester said that she still expects the fed funds rate range to be lowered this year.
  • San Francisco Fed President (FOMC voter) Daly said that there is no urgency to adjust rates at this time.
  • Developer China Vanke fell to a record low after its results showed that core profit fell more than 50.0% in 2023.
  • China Securities Daily speculated that a reserve requirement ratio cut is not likely in the short term.
  • New home sales in Hong Kong hit a ten-year high in March.
  • Reserve Bank of Australia Assistant Governor Kent spoke in support of changing to an ample reserve system from the current floor system. 
  • The latest policy minutes from the Reserve Bank of Australia showed that a potential rate hike was not discussed at the last policy meeting.
  • South Korea's March CPI was up 0.1% m/m (expected 0.3%; last 0.5%), rising 3.1% yr/yr, as expected (last 3.1%).
  • India's March Manufacturing PMI hit 59.1 (expected 59.2; last 56.9).
  • Australia's March Manufacturing PMI hit 47.3 (expected 46.8; last 47.8). March MI Inflation Gauge was up 0.1% m/m (last -0.1%) and March job advertisements were down 1.0% m/m (last -2.1%). March Commodity Prices fell 15.3% yr/yr (last -15.3%).
  • Eurozone's March Manufacturing PMI hit 46.1 (expected 45.7; last 46.5).
  • Germany's March Manufacturing PMI hit 41.9 (expected 41.6; last 42.5). March CPI was up 0.4% m/m (expected 0.4%; last 0.4%), rising 2.2% yr/yr, as expected (last 2.5%).
  • U.K.'s March Manufacturing PMI hit 50.3 (expected 49.9; last 47.5). March Nationwide HPI was down 0.2% m/m (expected 0.4%; last 0.7%) but up 1.6% yr/yr (expected 2.4%; last 1.2%). February BoE Consumer Credit reached GBP1.378 bln (expected GBP1.600 bln; last GBP1.770 bln) and February Mortgage Lending reached GBP1.51 bln (expected -GBP150 mln; last -GBP1.07 bln).
  • France's March Manufacturing PMI hit 46.2 (expected 45.8; last 47.1).
  • Italy's March Manufacturing PMI hit 50.4 (expected 48.7; last 48.9).
  • Spain's March Unemployment decreased by 33,400 (expected 10,000; last -7,500) and March Manufacturing PMI hit 51.4 (expected 51.1; last 51.5).
  • Swiss February Retail Sales were down 0.2% yr/yr (expected 0.4%; last 0.3%). March procure.ch PMI hit 45.2 (expected 45.0; last 44.0).
• Today's Data:
  • Factory orders increased 1.4% month-over-month in February (Briefing.com consensus 1.0%) after declining a revised 3.8% (from -3.6%) in January. Excluding transportation, factory orders increased 1.1% on the heels of a 0.6% decline in January. Shipments of manufactured goods were up 1.4% after a 0.8% decline in January.
    • The key takeaway from the report is that there was a pickup in new orders in February for durable and nondurable goods, demonstrating that there has not been a lingering drop-off in demand.
  • Job openings increased to 8.756 mln in February from a revised 8.748 mln (from 8.863 mln) in January.
• Commodities:
  • WTI crude: +1.7% to $85.18/bbl
  • Gold: UNCH at $2282.10/ozt
  • Copper: +0.5% to $4.07/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0764
  • GBP/USD: +0.1% to 1.2569
  • USD/CNH: UNCH at 7.2571 
  • USD/JPY: UNCH at 151.60
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -0.7%)
  • 8:15 ET: March ADP Employment Change (Briefing.com consensus 150,000; prior 140,000)
  • 10:30 ET: Weekly crude oil inventories (prior +3.17 mln)