Bond Market Update

Post-FOMC Advance Extended

• U.S. Treasuries climbed on Thursday but only kept a portion of their opening gains after spending the day in a steady retreat from morning highs. The trading day started on a firmly higher note with the 10-yr yield falling past its 200-day moving average (4.225%) to its lowest level in more than two weeks. The early gain was extended slightly in morning trade, but a steady reversal started just as equities opened with a strong rally off their opening lows. However, equities reversed as the day went on while the pullback in Treasuries continued, returning yields toward yesterday's closing levels. Today's economic reports were mostly in line with expectations, but the Existing Home Sales report for February (4.26 mln; Briefing.com consensus 3.95 mln) beat expectations, helping homebuilder shares climb from levels not seen in more than a year. Crude oil returned to this week's high while the U.S. Dollar Index climbed 0.4% to 103.88.
• Yield Check:
  • 2-yr: -2 bps to 3.96%
  • 3-yr: -2 bps to 3.93%
  • 5-yr: -2 bps to 4.01%
  • 10-yr: -2 bps to 4.23%
  • 30-yr: -1 bp to 4.56%

• News:
  • The Bank of England left its bank rate at 4.50%, as expected.
  • The Swiss National Bank lowered its policy rate by 25 basis points to 0.25%, as expected.
  • Sweden's Riksbank left its policy rate at 2.25%.
  • European Central Bank President Lagarde warned that a U.S.-EU trade war could cut eurozone growth by 0.3 percentage points.
  • France announced plans to spend EUR5 billion on defense.
  • The People's Bank of China made no changes to its one-year and five-year loan prime rates.
  • Hong Kong's February CPI was down 0.1% m/m (last 0.4%) but up 1.4% yr/yr (expected 1.8%; last 2.0%).
  • Australia's February employment decreased by 52,800 (expected 30,800; last 30,500) and full employment decreased by 35,700 (last 36,900). February Unemployment Rate remained at 4.1%, as expected, and Participation Rate fell to 66.8% from 67.2% (expected 67.3%).
  • New Zealand's Q4 GDP expanded 0.7% qtr/qtr (expected 0.4%; last -1.1%) but was down 1.1% yr/yr (expected -1.4%; last -1.6%). Q4 GDP Expenditure was up 0.8% qtr/qtr (last -0.9%). Q1 Westpac Consumer Sentiment fell to 89.2 from 97.5.
  • Eurozone's January Construction Output was up 0.2% m/m (last 0.4%).
  • Germany's February PPI was down 0.2% m/m (expected 0.2%; last -0.1%) but up 0.7% yr/yr (expected 1.0%; last 0.5%).
  • U.K.'s January Average Earnings Index + Bonus increased 5.8% yr/yr, as expected (last 6.1%). January three-month employment increased by 144,000 (expected 95,000; last 107,000) and January Unemployment Rate remained at 4.4%, as expected. February Claimant Count increased by 44,200 (expected 7,900; last 2,800).
  • Swiss February trade surplus reached CHF4.803 bln (expected surplus of CHF5.010 bln; last surplus of CHF6.148 bln).
• Today's Data:
  • Initial jobless claims for the week ending March 15 increased by 2,000 to 223,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending March 8 increased by 33,000 to 1.892 million.
    • The key takeaway from the report is that this period covers the week in which the survey for the employment report is conducted, so the low level of initial jobless claims will lead economists to project another relatively solid increase in nonfarm payrolls.
  • Existing home sales increased 4.2% month-over-month in February to a seasonally adjusted annual rate of 4.26 million (Briefing.com consensus 3.95 million) from an upwardly revised 4.09 million (from 4.08 million) in January. Sales were down 1.2% from the same period a year ago.
    • The key takeaway from the report is that existing home sales actually increased, as the consensus estimate called for a 3.2% month-over-month decline. The surprising strength suggests some unleashing of pent-up demand with more inventory on the market and prospective buyers adjusting to the higher level of mortgage rates.
  • The March Philadelphia Fed Index dipped to 12.5 (Briefing.com consensus 10.0) from 18.1 in February. The dividing line between expansion and contraction is 0.0, so this report indicates that business activity in the Philadelphia fed region expanded in March, but at a slower pace than the prior month.
  • Conference Board's Leading Economic Index was down 0.3% in February (Briefing.com consensus -0.2%) after being down a revised 0.2% (from -0.3%) in January.
  • The Current Account deficit narrowed to $303.9 bln in Q4 (Briefing.com consensus -$334.0 bln) from a revised $310.3 bln (from $310.9 bln) in Q3.
  • Weekly natural gas inventories increased by 9 bcf after decreasing by 62 bcf a week ago.
• Commodities:
  • WTI crude: +1.6% to $68.02/bbl
  • Gold: +0.1% to $3044.20/ozt
  • Copper: UNCH at $5.10/lb
• Currencies:
  • EUR/USD: -0.5% to 1.0849
  • GBP/USD: -0.3% to 1.2962
  • USD/CNH: +0.3% to 7.2523
  • USD/JPY: UNCH at 148.79
• No Data on Tomorrow's Schedule