Bond Market Update

Longer Tenors Extend Midweek Losses

• U.S. Treasuries had a mixed showing on Thursday as the 5-yr note and longer tenors added to their losses from Wednesday while the short end finished modestly higher after overcoming a soft start. The trading day started with losses across the board after President Trump's Wednesday evening announcement that a 25% tariff will be imposed on all car and light truck imports into the United States. On the bright side, the president added that reciprocal tariffs will be "lenient" but he also warned that Canada and the European Union will face large-scale tariffs if they collaborate on a response to U.S. duties. Treasuries climbed off their opening levels during the initial hour of action, but 5s and longer tenors found resistance before turning positive. The market remained near rebound highs in the afternoon even though the U.S. Treasury completed this week's note offering slate with a weak sale of 7-yr notes. Crude oil edged higher after overcoming some early weakness while the U.S. Dollar Index fell 0.2% to 104.31.
• Yield Check:
  • 2-yr: -1 bp to 4.00%
  • 3-yr: UNCH at 4.00%
  • 5-yr: +2 bps to 4.10%
  • 10-yr: +3 bps to 4.37%
  • 30-yr: +5 bps to 4.73%

• News:
  • European Central Bank policymaker Kazaks spoke in favor of additional rate cuts if current conditions persist.
  • LVMH CEO Arnault expressed confidence in the region's potential for resilience.
  • Canada's Prime Minister Carney said that his country will respond to U.S. auto tariffs soon.
  • Banxico lowered its policy rate by 50 bps to 9.00%, as expected.
  • China's Premier Li cautioned against "rising instability" in global markets.
  • Reserve Bank of Australia Assistant Governor Hunter shared a cautious view regarding additional rate cuts.
  • China's February Industrial Profit was down 0.3% YTD (last -3.3%).
  • Eurozone's February PPI was up 0.4% m/m (last 0.5%), rising 1.0% yr/yr (last 1.1%). February M3 Money Supply was up 4.0% yr/yr (expected 3.8%; last 3.6%), February Private Sector Loans rose 1.5% yr/yr (expected 1.4%; last 1.3%), and February loans to nonfinancials rose 2.2% (last 2.0%).
  • Spain's February Retail Sales were up 3.6% yr/yr (last 2.3%).
• Today's Data:
  • The third estimate for Q4 GDP was revised up to 2.4% (Briefing.com consensus 2.3%) from 2.3%, aided by an upward revision for government spending. The Q4 GDP Price Deflator was revised down to 2.3% (Briefing.com consensus 2.4%) from 2.4%.
    • The key takeaway from the report is that it shows a nice expansion in activity during the fourth quarter that was underpinned by consumer spending; however, the report's impact on the market is muted by its dated nature (we're just days away from being done with the first quarter).
  • Initial jobless claims for the week ending March 22 decreased 1,000 to 224,000 (Briefing.com consensus 225,000). Continuing jobless claims for the week ending March 15 decreased 25,000 to 1.856 million.
    • The key takeaway from the report is that initial jobless claims -- a leading indicator -- continue to idle at levels consistent with an otherwise solid labor market.
  • Pending Home Sales were up 2.0% in February (Briefing.com consensus 2.9%) after falling 4.6% in January.
  • Weekly natural gas inventories increased by 37 bcf after increasing by 9 bcf a week ago.
  • $44 bln 7-year Treasury note auction results (prior 12-auction average):
    • High yield: 4.233% (4.262%).
    • Bid-to-cover: 2.53 (2.59).
    • Indirect bid: 61.2% (71.0%).
    • Direct bid: 26.1% (17.4%).
• Commodities:
  • WTI crude: +0.4% to $69.93/bbl
  • Gold: +1.3% to $3060.50/ozt
  • Copper: -2.3% to $5.12/lb
• Currencies:
  • EUR/USD: +0.5% to 1.0791
  • GBP/USD: +0.6% to 1.2949
  • USD/CNH: -0.1% to 7.2704
  • USD/JPY: +0.4% to 151.14
• The Day Ahead:
  • 8:30 ET: 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%)
  • 10:00 ET: Final March University of Michigan Consumer Sentiment (Briefing.com consensus 57.9; prior 57.9)