Bond Market Update

Improved Risk Sentiment Weighs

• U.S. Treasuries started the week on a lower note, sending yields back to their highs from last week. The cash session opened with sharp losses after a night that saw an improvement in global risk sentiment. The market received flash Manufacturing and Services PMI readings from major economies with Japan's Flash Manufacturing PMI (48.3; prior 49.0) showing a deepening contraction while readings from Australia (52.6; prior 50.4) and India (57.6; prior 56.3) showed an acceleration in activity. Meanwhile, the eurozone's Manufacturing PMI (48.7; expected 48.3; prior 47.6) showed a deceleration in the pace of contraction while Services PMI (50.4; expected 51.2; prior 50.6) showed slowing growth. In addition, there was hope that reciprocal tariffs, which are set to come into effect on April 2, will be implemented in a more targeted fashion. Treasuries added to their starting losses after the market received the flash S&P Global U.S. Manufacturing PMI (49.8; prior 52.7), which showed a return to contraction, while flash S&P Global U.S. Services PMI (54.3; prior 51.0) pointed to an acceleration in growth. The post-data losses were narrowed slightly as the day went on, but Treasuries returned to lows by the cash close. Crude oil climbed to a three-week high while the U.S. Dollar Index rose 0.2% to 104.27.
• Yield Check:
  • 2-yr: +8 bps to 4.03%
  • 3-yr: +9 bps to 4.02%
  • 5-yr: +9 bps to 4.10%
  • 10-yr: +8 bps to 4.33%
  • 30-yr: +6 bps to 4.66%

• News:
  • Atlanta Fed President Bostic expects just one rate cut this year, according to MarketWatch.
  • OPEC+ is sticking to its plan for an output increase in May to balance production, according to Reuters.
  • Bank of Japan Governor Ueda said that another rate hike is likely if inflation nears the 2.0% target.
  • Reserve Bank of Australia Governor Bullock would not commit to additional rate cuts.
  • European Central Bank policymaker Cipollone said that inflation may return to target sooner than it was previously expected while ECB President Lagarde said that the central bank is ready to adjust rates if inflationary pressures shift.
  • Bank of England Governor Bailey said that rate cuts remain on the table.
  • Japan's flash March Manufacturing PMI hit 48.3 (expected 49.2; last 49.0) and flash Services PMI hit 49.5 (last 53.7).
  • India's flash March Manufacturing PMI hit 57.6 (last 56.3) and flash Services PMI hit 57.7 (last 59.0).
  • Singapore's February CPI was up 0.8% m/m (last -0.8%), rising 0.9% yr/yr (expected 1.0%; last 1.2%). February Core CPI was up 0.6% yr/yr (expected 0.7%; last 0.8%).
  • Australia's flash March Manufacturing PMI hit 52.6 (last 50.4) and flash March Services PMI hit 51.2 (last 50.8).
  • Eurozone's flash March Manufacturing PMI hit 48.7 (expected 48.3; last 47.6) and flash Services PMI hit 50.4 (expected 51.2; last 50.6).
  • Germany's flash March Manufacturing PMI hit 48.3 (expected 47.1; last 46.5) and flash Services PMI hit 50.2 (expected 52.3; last 51.1).
  • U.K.'s flash March Manufacturing PMI hit 44.6 (expected 47.3; last 46.9) and flash Services PMI hit 53.2 (expected 51.2; last 51.0).
  • France's flash March Manufacturing PMI hit 48.9 (expected 46.2; last 45.8) and flash Services PMI hit 46.6 (expected 46.3; last 45.3).
• Today's Data:
  • The S&P Global U.S. Manufacturing PMI hit 49.8 in the flash reading for March, down from February's final reading of 52.7.
  • The S&P Global U.S. Services PMI hit 54.3 in the flash reading for March, up from February's final reading of 51.0.
• Commodities:
  • WTI crude: +1.3% to $69.15/bbl
  • Gold: -0.2% to $3015.60/ozt
  • Copper: -0.6% to $5.08/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0804
  • GBP/USD: +0.1% to 1.2924
  • USD/CNH: +0.1% to 7.2632
  • USD/JPY: +0.9% to 150.56
• The Day Ahead:
  • 9:00 ET: 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%)
  • 10:00 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)
• Treasury Auctions:
  • 13:00 ET: $69 bln 2-yr Treasury note auction results