Bond Market Update

Treasuries Dip as Tariffs Remain in Focus

• Longer-dated U.S. Treasuries finished Wednesday with modest losses while the short end outperformed, ending little changed. The trading day started with losses, but the market did not see much follow-through selling. Instead, the market nestled into a sideways range that remained in effect into the close. Today's $70 bln 5-yr note auction met weaker demand than yesterday's 2-yr note offering, but the market reaction was limited. On the tariff front, President Trump is expected to announce that auto imports will be subject to tariffs but auto parts imports will not, according to The Wall Street Journal. An official announcement will be made at 16:00 ET. Crude oil built on this month's bounce off a fresh low for the year while the U.S. Dollar Index rose 0.3% to 104.52.
• Yield Check:
  • 2-yr: +1 bp to 4.01%
  • 3-yr: +2 bps to 4.00%
  • 5-yr: +3 bps to 4.08%
  • 10-yr: +3 bps to 4.34%
  • 30-yr: +3 bps to 4.68%

• News:
  • The Atlanta Fed's GDPNow forecast for Q1 GDP was left unrevised at -1.8% in the latest update. 
  • European Central Bank President Christine Lagarde emphasized resilience, stating, "Europe must prepare for any trade shocks," boosting defense stocks like Rheinmetall.
  • Goldman Sachs analysts told The New York Times that "European earnings could face pressure" if trade tensions persist, tempering broader optimism.
  • British Chancellor Reeves announced that benefits will be cut by GBP5 bln in the spring budget.
  • Bank of Japan Governor Ueda continued hinting at potential rate hikes if inflation aligns with forecasts, according to Nikkei.
  • The Chief Executive of the Hong Kong Monetary Authority highlighted the potential for significant Chinese capital inflows into Hong Kong, emphasizing opportunities for the city's financial markets in the coming years.
  • Japan's January Corporate Services Price Index was up 3.0% yr/yr (expected 3.1%; last 3.2%). January Leading Index remained at 108.3 (expected 108.0) and Coincident Indicator ticked up 0.1% m/m, as expected (last 1.0%).
  • South Korea's March BSI Manufacturing Index rose to 68 from 65.
  • Singapore's February Industrial Production was down 7.5% m/m (expected -0.3%; last 2.8%), falling 1.3% yr/yr (expected 7.5%; last 8.0%).
  • Australia's February Monthly CPI Indicator was up 2.4% yr/yr (expected 2.5%; last 2.5%).
  • U.K.'s February CPI was up 0.4% m/m (expected 0.5%; last -0.1%), rising 2.8% yr/yr (expected 3.0%; last 3.0%). February Core CPI was up 0.4% m/m (expected 0.5%; last -0.4%), rising 3.5% yr/yr (expected 3.6%; last 3.7%). February House Price Index was up 4.9% yr/yr (expected 4.4%; last 4.6%).
  • France's March Consumer Confidence fell to 92 from 93 (expected 94).
  • Spain's Q4 GDP expanded 0.8% qtr/qtr, as expected (last 0.8%), growing 3.4% yr/yr (expected 3.5%; last 3.5%).
  • Swiss March ZEW Expectations fell to -10.7 from 3.4.
• Today's Data:
  • New orders for manufactured durable goods increased 0.9% month-over-month in February (Briefing.com consensus -1.2%) following an upwardly revised 3.3% (from 3.1%) for January. Excluding transportation, durable goods orders rose 0.7% month-over-month (Briefing.com consensus 0.1%) following an upwardly revised 0.1% increase (from 0.0%) in January.
    • The key takeaway from the report is that durable goods orders were stronger than expected; however, that understanding was diluted by the added realization that there was a downturn in business spending, evidenced by the 0.3% decline in nondefense capital goods orders, excluding aircraft.
  • The weekly MBA Mortgage Index fell 2.0% to follow last week's 6.2% drop. The Refinance Index was down 5.3% while the Purchase Index rose 0.7%.
  • Weekly crude oil inventories decreased by 3.34 mln barrels after increasing by 1.75 mln barrels a week ago.
  • $70 bln 5-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.100% (4.194%).
    • Bid-to-cover: 2.33 (2.39).
    • Indirect bid: 75.8% (68.6%).
    • Direct bid: 11.0% (18.1%).
• Commodities:
  • WTI crude: +1.0% to $69.66/bbl
  • Gold: -0.1% to $3022.30/ozt
  • Copper: +0.6% to $5.24/lb
• Currencies:
  • EUR/USD: -0.4% to 1.0754
  • GBP/USD: -0.5% to 1.2883
  • USD/CNH: +0.2% to 7.2811
  • USD/JPY: +0.4% to 150.47
• The Day Ahead:
  • 8:30 ET: 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%)
  • 10:00 ET: February Pending Home Sales (Briefing.com consensus 2.9%; prior -4.6%)
  • 10:30 ET: Weekly natural gas inventories (prior +9 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results