Bond Market Update

Long End Paces Intraday Selling

• U.S. Treasuries ended Tuesday in the red after a sideways start gave way to intraday selling. The trading day started near yesterday's closing levels with Treasuries making an early attempt at rising to fresh highs for the month before meeting some resistance. The flat start followed a night that saw the release of a below-consensus Q4 GDP from Japan (0.6%; expected 0.7%) and a dip in the NFIB Small Business Optimism Index for the U.S. (to 100.7 from 102.8). The market extended to fresh highs after the Job Openings and Labor Turnover survey for January showed that job openings increased to 7.740 million from a revised 7.508 million in December. However, the post-data move was followed by selling that left the market at fresh lows in the afternoon. The U.S. Treasury started this week's note and bond offering slate with an underwhelming $58 bln 3-yr note sale ahead of tomorrow's $39 bln 10-yr note reopening. Crude oil stayed near its lowest level of the year while the U.S. Dollar Index fell 0.7% to 103.25, reaching its lowest level since mid-October.
• Yield Check:
  • 2-yr: +4 bps to 3.94%
  • 3-yr: +4 bps to 3.94%
  • 5-yr: +7 bps to 4.04%
  • 10-yr: +8 bps to 4.29%
  • 30-yr: +6 bps to 4.60%

• News:
  • President Trump said that the tariff on aluminum and steel imports from Canada will be increased to 50%.
  • Ukraine has agreed to a 30-day cease fire proposed by the United States.
  • The Wall Street Journal reported that plans are being made for a June meeting between President Trump and China's President Xi.
  • A former Bank of Japan policymaker said that the rate hike is likely to take place in June.
  • South Korea's exports were up 2.9% yr/yr through the first ten days of March with chip exports showing no change yr/yr.
  • German politicians are hoping to formalize the recently-announced changes to military financing rules later this week.
  • Japan's Q4 GDP expanded 0.6% qtr/qtr (expected 0.7%; last 0.3%) while annualized GDP grew 2.2% qtr/qtr (last 1.2%). Q4 Capital Expenditure was up 0.6% qtr/qtr (expected 0.5%; last -0.1%), External Demand was up 0.7% qtr/qtr, as expected (last -0.2%), Private Consumption was unchanged qtr/qtr (expected 0.1%; last 0.7%), and GDP Price Index was up 2.9% yr/yr (expected 2.8%; last 2.4%). January Household Spending fell 4.5% m/m (expected -1.9%; last 2.3%) but was up 0.8% yr/yr (expected 3.7%; last 2.7%). February Machine Tool Orders rose 3.5% yr/yr (expected 4.7%; last 11.2%).
  • Australia's March Westpac Consumer Sentiment was up 4.0% (last 0.1%). February NAB Business Confidence fell to -1 from 5 and Business Survey rose to 4 from 3.
  • New Zealand's Q4 Manufacturing Sales Volume rose 1.1% qtr/qtr (last -0.9%).
• Today's Data:
  • Job openings increased to 7.740 million in January from a revised 7.508 million (from 7.600 million) in December.
  • The NFIB Small Business Optimism Index fell to 100.7 in February from 102.8 in January.
  • $58 bln 3-year Treasury note auction results (prior 12-auction average): 
    • High yield: 3.908% (4.208%).
    • Bid-to-cover: 2.70 (2.59).
    • Indirect bid: 62.5% (66.1%).
    • Direct bid: 26.0% (17.9%).
• Commodities:
  • WTI crude: +0.3% to $66.28/bbl
  • Gold: +0.8% to $2921.50/ozt
  • Copper: +2.4% to $4.76/lb
• Currencies:
  • EUR/USD: +0.9% to 1.0931
  • GBP/USD: +0.6% to 1.2955
  • USD/CNH: -0.5% to 7.2271
  • USD/JPY: +0.4% to 147.79
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 20.4%)
  • 8:30 ET: February CPI (Briefing.com consensus 0.3%; prior 0.5%) and Core CPI (Briefing.com consensus 0.3%; prior 0.4%)
  • 10:30 ET: Weekly crude oil inventories (prior -2.33 mln)
  • 14:00 ET: February Treasury Budget (prior -$129.0 bln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results