Bond Market Update

Rally Fueled by Ongoing Growth Worries

• U.S. Treasuries began the week on a firmly higher note with issues in the belly reclaiming all of their losses from last week. The Monday rally was largely a done deal at the cash open, as Treasuries started with solid gains and defended them into the afternoon. The advance developed after President Trump said during a weekend TV interview that the economy is going through a "period of transition" and would not rule out a potential recession. Today's rally resulted in the lowest settlement for the 2-yr yield since early October while the 10-yr yield returned back below its 200-day moving average (4.234%). The market did not receive any noteworthy data today, but the CPI report for February (Briefing.com consensus 0.3%) will be released on Wednesday. Tomorrow, the U.S. Treasury will kick off this week's note and bond auction slate with a $58 bln 3-yr note offering. Crude oil gave back its advance from Friday while the U.S. Dollar Index rose 0.2% to 103.99.
• Yield Check:
  • 2-yr: -10 bps to 3.90%
  • 3-yr: -11 bps to 3.90%
  • 5-yr: -12 bps to 3.97%
  • 10-yr: -10 bps to 4.21%
  • 30-yr: -8 bps to 4.54%

• News:
  • Mark Carney will be Canada's next prime minister.
  • Secretary of State Rubio said that a Ukraine peace deal would require land concessions, according to The New York Times
  • There is some speculation that the European Central Bank will pause its cutting campaign after policymaker Schnabel expressed some concerns about inflation.
  • Germany's CDU and SPD are moving closer to forming a ruling coalition.
  • There was growing speculation that the Bank of Japan will refrain from a rate hike in March as it observes the impact of the January hike.
  • Australia's Prime Minister Albanese announced that national elections will be held in May.
  • China's February CPI was down 0.2% m/m (expected -0.1%; last 0.7%), falling 0.7% yr/yr (expected -0.4%; last 0.5%). February PPI was down 2.2% yr/yr (expected -2.0%; last -2.3%).
  • Japan's January Overall Wage Income was up 2.8% yr/yr (expected 3.2%; last 4.4%). January Current Account surplus reached JPY1.94 trln (expected surplus of JPY1.97 trln; last surplus of JPY2.73 trln). January Leading Index rose to 108.0 from 107.9 (expected 108.1) and Coincident Indicator was up 0.1% m/m (last 1.0%). February Economy Watchers Current Index fell to 45.6 from 48.6 (expected 48.5).
  • Eurozone's March Sentix Investor Confidence rose to -2.9 from -12.7 (expected -9.1).
  • Germany's January trade surplus reached EUR16.0 bln (expected surplus of EUR21.0 bln; last surplus of EUR20.7 bln) as imports rose 1.2% m/m (last 1.6%) and exports fell 2.5% m/m (last 2.5%). January Industrial Production was up 2.0% m/m (expected 1.6%; last -1.5%) but down 1.5% yr/yr (last -2.3%).
  • Italy's January PPI was up 1.6% m/m (last 0.6%), rising 4.4% yr/yr (last 1.1%).
  • Swiss February SECO Consumer Climate fell to -34 from -21 (expected -28).
• Commodities:
  • WTI crude: -1.6% to $66.06/bbl 
  • Gold: -0.6% to $2898.50/ozt
  • Copper: -1.3% to $4.65/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0821
  • GBP/USD: -0.4% to 1.2863
  • USD/CNH: +0.3% to 7.2641
  • USD/JPY: -0.6% to 147.10
• The Day Ahead:
  • 6:00 ET: February NFIB Small Business Optimism Index (prior 102.8)
  • 10:00 ET: January job openings (prior 7.600 mln)
• Treasury Auctions:
  • 13:00 ET: $58 bln 3-yr Treasury note auction results