Bond Market Update

FOMC Supports Intraday Bounce

• U.S. Treasuries finished Wednesday with gains across the curve and leadership from the front end after overcoming some early weakness with help from the FOMC Statement for March. The trading day started with modest losses that were extended in early trade alongside an upbeat start in equities. Treasuries remained on the defensive into the early afternoon, revisiting their lows from this week, but they rallied back once the market received the latest policy Statement from the Fed. The Statement itself was essentially unchanged from the last directive, but the Fed also agreed to slow the pace of its balance sheet runoff of Treasury securities to $5 bln per month from $25 bln per month while agency MBS runoff will be maintained at $35 bln per month. In addition, the latest economic projections showed a reduced growth forecast for 2025 to 1.5-1.9% from 1.8-2.2% and an increased forecast for this year's fed funds rate range to 3.90% to 4.40% from 3.60% to 4.10% that was projected in December, reflecting increased recent hawkishness. During his press conference, Fed Chairman Powell again said that there is no rush to adjust policy, repeating a view that he's been espousing since late 2024. The post-FOMC rally pressured the 5-yr yield back below its 200-day moving average (4.082%) while the 10-yr yield settled just above the 200-day moving average of its own (4.227%). Crude oil recovered some of yesterday's loss while the U.S. Dollar Index rose 0.3% to 103.56, inching away from levels last seen in mid-October.
• Yield Check:
  • 2-yr: -6 bps to 3.98%
  • 3-yr: -5 bps to 3.96%
  • 5-yr: -4 bps to 4.03%
  • 10-yr: -3 bps to 4.26%
  • 30-yr: -1 bp to 4.57%

• News:
  • The EU aims to reduce its steel imports by 15% due to tariffs, according to Reuters.
  • China's President Xi is reportedly angry that CK Hutchinson did not discuss its sale of Panama Canal assets to BlackRock with the government.
  • Bank Indonesia took steps to stabilize the rupiah after a volatile Tuesday in the country's equity market.
  • Euronext plans to consolidate over 3,300 exchange-traded product listings onto a single exchange, aiming to reduce market fragmentation and lower trading costs for retail investors.
  • British Chancellor Reeves will reportedly announce additional public spending cuts next week.
  • Japan's February trade surplus reached JPY584.5 bln (expected JPY722.8 bln; last deficit of JPY2.736.6 trln) as imports fell 0.7% yr/yr (expected 0.1%; last 16.2%) and exports rose 11.4% yr/yr (expected 12.1%; last 7.3%). January Core Machinery Orders were down 3.5% m/m (expected -0.1%; last -0.8%) but up 4.4% yr/yr (expected 6.9%; last 4.3%). March Reuters Tankan Index fell to -1 from 3. January Industrial Production was down 1.1% m/m, as expected (last -0.3%) and Capacity Utilization rose 4.5% m/m (last 0.1%).
  • Singapore's Q4 Unemployment Rate remained at 1.9%, as expected.
  • Australia's February MI Leading Index was up 0.1% m/m (last 0.1%).
  • New Zealand's Q1 Westpac Consumer Sentiment fell to 89.2 from 97.5. Q4 Current Account deficit reached NZD7.04 bln (expected deficit of NZD6.68 bln; last deficit of NZD10.58 bln).
  • Eurozone's February CPI was up 0.4% m/m (expected 0.5%; last -0.3%), rising 2.3% yr/yr (expected 2.4%; last 2.5%). February Core CPI was up 0.5% m/m (expected 0.6%; last -0.9%), rising 2.6% yr/yr, as expected (last 2.7%). Q4 Wages were up 4.1% yr/yr (last 4.3%) and Q4 Labor Cost Index was up 3.7% yr/yr (last 4.5%).
• Today's Data:
  • The weekly MBA Mortgage Index fell 6.2% to follow last week's 11.2% jump. The Refinance Index was down 12.8% while the Purchase Index ticked up 0.1%.
  • Weekly crude oil inventories increased by 1.75 mln barrels after increasing by 1.45 mln barrels a week ago.
• Commodities:
  • WTI crude: +0.3% to $66.96/bbl
  • Gold: UNCH at $3041.10/ozt
  • Copper: +2.0% to $5.10/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0908
  • GBP/USD: UNCH at 1.3007
  • USD/CNH: UNCH at 7.2290
  • USD/JPY: -0.3% to 148.85
• The Day Ahead:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 220,000), Continuing Claims (prior 1.870 mln), Q4 Current Account Balance (Briefing.com consensus -$334.0 bln; prior -$131.4 bln), and March Philadelphia Fed Survey (Briefing.com consensus 10.0; prior 18.1)
  • 10:00 ET: February Existing Home Sales (Briefing.com consensus 3.95 mln; prior 4.08 mln) and February Leading Indicators (Briefing.com consensus -0.2%; prior -0.3%)
  • 10:30 ET: Weekly natural gas inventories (prior -62 bcf)