Bond Market Update

Long End Resists Intraday Pressure

• U.S. Treasuries had a mixed showing to begin the week, as the long bond edged higher while shorter tenors finished in the red. Longer tenors outperformed at the start, but the entire complex faced some selling during the initial hour of action after the release of today's initial batch of data. The Retail Sales report for February (0.2%; Briefing.com consensus 0.7%) and the Empire State Manufacturing Survey (-20.0; Briefing.com consensus 2.0) disappointed, with the latter showing an increase in prices paid and price received, fueling inflationary concerns. Treasuries marked lows about 30 minutes after the data, bouncing back as the morning went on. The rebound produced highs in the late morning, but the entire complex slid back to lows in the afternoon as equities rallied after it was reported that new U.S. Trade Representative Greer aims for a more orderly rollout of reciprocal tariffs on April 2. Crude oil recorded a modest gain while the U.S. Dollar Index fell 0.3% to 103.38.
• Yield Check:
  • 2-yr: +3 bps to 4.05%
  • 3-yr: +3 bps to 4.03%
  • 5-yr: +2 bps to 4.10%
  • 10-yr: UNCH at 4.31%
  • 30-yr: -2 bps to 4.60%

• News:
  • There was some speculation that Sanae Takaichi, who supports a weaker yen, could replace Japan's Prime Minister Ishiba.
  • China State Council announced a "Special Action Plan" aimed at increasing domestic demand.
  • The OECD downgraded the U.K.'s growth forecasts for 2025 (to 1.4% from 1.7%) and 2026 (to 1.2% from 1.3%), citing weak economic performance and global trade tensions.
  • China's February House Prices were down 4.8% yr/yr (last -5.0%). February Fixed Asset Investment rose 4.1% yr/yr (expected 3.2%; last 3.2%), February Industrial Production rose 5.9% yr/yr (expected 5.3%; last 6.2%), February Retail Sales grew 4.0% yr/yr (expected 3.8%; last 3.7%), and February Unemployment Rate increased to 5.4% from 5.1% (expected 5.1%).
  • South Korea's February trade surplus reached $4.15 bln (expected $4.30 bln; last deficit of $1.86 bln) as imports rose 0.2% yr/yr, as expected (last -6.4%) and exports increased 0.7% yr/yr (expected 1.0%; last -10.2%).
  • India's February trade deficit reached $14.05 bln (last deficit of $22.99 bln). February WPI Inflation was up 2.38% yr/yr (expected 2.36%; last 2.31%), and WPI Food Inflation was up 3.38% yr/yr (last 5.88%).
  • Singapore's February trade surplus reached SGD6.16 bln (last surplus of SGD3.04 bln) as non-oil exports rose 2.6% m/m (expected 2.5%; last -3.3%), increasing 7.6% yr/yr (expected 8.7%; last -2.1%).
  • Italy's February CPI was up 0.2% m/m, as expected (last 0.6%), rising 1.6% yr/yr (expected 1.7%; last 1.5%).
• Today's Data:
  • Retail sales increased 0.2% month-over-month in February (Briefing.com consensus 0.7%) following a downwardly revised 1.2% decline (from -0.9%) in January. Excluding autos, retail sales were up 0.3% month-over-month (Briefing.com consensus 0.4%) following a 0.6% decline (from -0.4%) in January.
    • The key takeaway from the report is that control group retail sales, which exclude auto, gasoline station, building materials, and food services sales, jumped 1.0% month-over-month following a downwardly revised 1.0% decline (from -0.8%) in January.
  • The New York Fed Empire State Manufacturing Survey contained some unnerving inflation news juxtaposed with a disappointing reading on business activity. Specifically, the General Business Conditions Index declined to -20.0 in March from 5.7 in February. A number below 0.0 denotes a contraction in business activity in the New York Fed region. The prices paid index rose five points to 44.9, its highest level in more than two years, while the prices received index jumped three points to 22.4, hitting its highest level since May 2023.
    • The key takeaway from the report is that it plays into some of the stagflation worries that have infiltrated the market.
  • The NAHB Housing Market Index fell to 39 in March (Briefing.com consensus 43) from 42 in February.
  • Business Inventories were up 0.3% in January (Briefing.com consensus 0.3%) after decreasing 0.2% in December.
• Commodities:
  • WTI crude: +0.6% to $67.58/bbl
  • Gold: +0.2% to $3006.60/ozt
  • Copper: +1.4% to $4.97/lb
• Currencies:
  • EUR/USD: +0.4% to 1.0923 
  • GBP/USD: +0.5% to 1.2995
  • USD/CNH: -0.1% to 7.2261
  • USD/JPY: +0.4% to 149.18
• The Day Ahead:
  • 8:30 ET: February Housing Starts (Briefing.com consensus 1.385 mln; prior 1.366 mln), Building Permits (Briefing.com consensus 1.450 mln; prior 1.483 mln), February Import Prices (prior 0.3%), Import Prices ex-oil (prior 0.1%), Export Prices (prior 1.3%), and Export Prices ex-agriculture (prior 1.5%) 
  • 9:15 ET: February Industrial Production (Briefing.com consensus 0.2%; prior 0.5%) and Capacity Utilization (Briefing.com consensus 77.7%; prior 77.8%)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results