Bond Market Update

Long End Leads Early Weakness

• U.S. Treasuries are on track for a lower start with the long end expected to pace the early weakness. Treasury futures saw minimal movement during the first half of the overnight session, but pressure began building once the focus turned to action in Europe where sovereign debt is on the defensive while equities trade higher. Economic data released overnight showed in-line BoJ Core CPI for January (2.2%) and an improvement in Germany's March ifo Business Climate Index for March (to 86.7 from 85.3; expected 86.8), though the uptick undershot expectations. The U.S. session will see the release of some housing data and a $69 bln 2-yr note sale from the U.S. Treasury. Crude oil is building on yesterday's advance while the U.S. Dollar Index is down 0.2% at 104.09.
• Yield Check:
  • 2-yr: +1 bp to 4.04%
  • 3-yr: +1 bp to 4.03%
  • 5-yr: +1 bp to 4.11%
  • 10-yr: +3 bps to 4.36%
  • 30-yr: +4 bps to 4.70%

• News:
  • President Trump is considering a two-step tariff approach, according to FT.
  • Indonesia's rupiah fell to levels not seen since 1998 against the dollar, prompting speculation about an intervention from Bank Indonesia.
  • China's stimulus plans may include spending on services, according to FT.
  • Japan's January BoJ Core CPI was up 2.2% yr/yr, as expected (last 2.2%).
  • South Korea's March Consumer Confidence fell to 93.4 from 95.2.
  • Hong Kong's February trade deficit reached $36.3 bln (last surplus of $2.1 bln) as imports rose 11.8% m/m (last 0.5%) and exports grew 15.4% m/m (last 0.1%).
  • Germany's March ifo Business Climate Index rose to 86.7 from 85.3 (expected 86.8). March Current Assessment rose to 85.7 from 85.0 (expected 85.5; last 85.0) and Business Expectations rose to 87.7 from 85.6 (expected 87.9).
  • Spain's February PPI was up 6.6% yr/yr (last 2.6%).
• Commodities:
  • WTI Crude: +0.6% to $69.55/bbl
  • Gold: +0.4% to $3027.10/ozt
  • Copper: +1.1% to $5.151/lb
• Currencies:
  • EUR/USD: +0.2% to 1.0821
  • GBP/USD: +0.2% to 1.2951
  • USD/CNH: UNCH at 7.2628
  • USD/JPY: -0.3% to 150.14
• Data out Today:
  • 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