Bond Market Update

Long End Paces Intraday Reversal

• U.S. Treasuries had a mixed finish to the week with the front end rising for the fourth consecutive day while longer tenors retreated, giving back some of their gains from this week. The trading day started with solid gains across the curve after an overnight advance in the futures market alongside European debt. There was no U.S. data influencing today's action, which had the market spend early trade in a sideways range, followed by a slow retreat from highs that was paced by the long bond. That retreat returned the 30-yr bond to little changed for the week while the 2-yr note eked out a slim gain, building on this week's advance. Crude oil extended this week's gain to $1.07, or 1.6%, per barrel, while the U.S. Dollar Index rose 0.2% to 104.06, adding 0.3% for the week.
• Yield Check:
  • 2-yr: -1 bp to 3.95% (-7 bps this week)
  • 3-yr: UNCH at 3.93% (-7 bps this week)
  • 5-yr: UNCH at 4.01% (-7 bps this week)
  • 10-yr: +2 bps to 4.25% (-6 bps this week)
  • 30-yr: +4 bps to 4.60% (-2 bps this week)

• News:
  • Germany's upper house approved a borrowing increase and a EUR500 bln infrastructure and defense spending fund.
  • Foreign investors bought JPY3.4 trln worth of Japanese bonds last week by using proceeds from stock sales.
  •  Indonesia's equity market saw a continuation of its recent weakness amid calls for a strengthening of the country's central bank.
  • South Korea's opposition party called for the impeachment of acting President Choi.
  • Japan's February National CPI was down 0.1% m/m (last 0.5%) but up 3.7% yr/yr (last 4.0%). February National Core CPI was up 3.0% yr/yr (expected 2.9%; last 3.2%).
  • South Korea's February PPI was unchanged m/m (last 0.6%), rising 1.5% yr/yr (last 1.8%).
  • New Zealand's February trade surplus reached NZD510 mln (expected deficit of NZD235 mln; last deficit of NZD544 mln). February Credit Card Spending was up 0.9% yr/yr (last 1.3%).
  • Eurozone's January Current Account surplus reached EUR35.4 bln (last surplus of EUR38.4 bln).
  • U.K.'s February Public Sector Net Borrowing reached GBP10.71 bln (expected GBP7.00 bln; last -GBP13.32 bln). CBI Industrial Trends Orders Index fell to -29 from -28 (expected -30).
  • France's March Business Survey fell to 96 from 97 (expected 97).
• Commodities:
  • WTI crude: +0.4% to $68.27/bbl
  • Gold: -0.7% to $3022.10/ozt
  • Copper: +0.2% to $5.11/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0823
  • GBP/USD: -0.3% to 1.2927
  • USD/CNH: +0.1% to 7.2564
  • USD/JPY: +0.3% to 149.17
• The Week Ahead:
  • Monday: Flash March S&P Global U.S. Manufacturing PMI (prior 52.7) and flash March S&P Global U.S. Services PMI (prior 51.0) at 9:45 ET
  • Tuesday: January FHFA Housing Price Index (prior 0.4%) and January S&P Case-Shiller Home Price Index (Briefing.com consensus 4.6%; prior 4.5%) at 9:00 ET; February New Home Sales (Briefing.com consensus 680,000; prior 657,000) and March Consumer Confidence (Briefing.com consensus 94.2; prior 98.3) at 10:00 ET; and $69 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -6.2%) at 7:00 ET; February Durable Orders (Briefing.com consensus -1.2%; prior 3.1%) and Durable Orders ex-transport (Briefing.com consensus 0.1%; prior 0.0%) at 8:30 ET; weekly crude oil inventories (prior +1.75 mln) at 10:30 ET; and $70 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: Q4 GDP -- third estimate (Briefing.com consensus 2.3%; prior 2.3%), Q4 GDP Deflator -- third estimate (Briefing.com consensus 2.4%; prior 2.4%), Weekly Initial Claims (Briefing.com consensus 225,000; prior 223,000), Continuing Claims (prior 1.892 mln), advance February goods trade balance (prior -$153.3 bln), advance February Retail Inventories (prior -0.1%), and advance February Wholesale Inventories (prior 0.7%) at 8:30 ET; February Pending Home Sales (Briefing.com consensus 2.9%; prior -4.6%) at 10:00 ET; weekly natural gas inventories (prior +9 bcf) at 10:30 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
  • Friday: February Personal Income (Briefing.com consensus 0.4%; prior 0.9%), Personal Spending (Briefing.com consensus 0.6%; prior -0.2%), PCE Prices (Briefing.com consensus 0.3%; prior 0.3%), and Core PCE Prices (Briefing.com consensus 0.4%; prior 0.3%) at 8:30 ET; and final March University of Michigan Consumer Sentiment (Briefing.com consensus 57.9; prior 57.9) at 10:00 ET.