Bond Market Update

Boosted by Persistent Caution

• U.S. Treasuries are on track for a firmly higher start after a steady rise in the overnight futures market. Treasury futures jumped at the start of the overnight session, adding to their gains as the night went on. The entire complex has advanced, pressuring yields by about six basis points across the curve. Overall investor sentiment remains dampened by Wednesday's impending implementation of reciprocal tariffs and the surrounding uncertainty. In addition, The Wall Street Journal reported that the Trump administration could broaden the tariffs that are about to be imposed. Participants received a sizable batch of economic data with China's Manufacturing PMI (50.5) and Non-Manufacturing PMI (50.8) for March showing an acceleration in activity. In Europe, Germany's flash CPI for March met expectations, showing a slight deceleration in the yr/yr rate to 2.2% from 2.3%. Economic data during the U.S. session will be limited to the 9:45 ET release of the Chicago PMI (Briefing.com consensus 45.3; prior 45.5) for March. Crude oil is on the rise while the U.S. Dollar Index is down 0.1% at 103.97.
• Yield Check:
  • 2-yr: -6 bps to 3.85%
  • 3-yr: -6 bps to 3.84%
  • 5-yr: -6 bps to 3.92%
  • 10-yr: -7 bps to 4.19%
  • 30-yr: -6 bps to 4.57%

• News: 
  • CK Hutchinson will reportedly not go through with the deal to sell Panama Canal assets to BlackRock this week.
  • The People's Bank of China issued CNY500 bln worth of special sovereign bonds to recapitalize a few tier-1 banks.
  • The Reserve Bank of Australia will meet overnight, but the likelihood of a rate cut is seen as low.
  • British Prime Minister Starmer said that his discussions with President Trump about a trade deal have been productive.
  • European Central Bank policymaker Panetta called for caution in adjusting interest rates. 
  • China's March Manufacturing PMI hit 50.5 (expected 50.4; last 50.2) and Non-Manufacturing PMI hit 50.8 (expected 50.5; last 50.4).
  • Japan's February Industrial Production rose 2.5% m/m (expected 1.9%; last -1.1%), February Retail Sales grew 1.4% yr/yr (expected 2.4%; last 4.4%), February Housing Starts rose 2.4% yr/yr (expected -2.3%; last -4.6%) and Construction Orders fell 3.3% yr/yr (last 12.2%).
  • South Korea's February Industrial Production was up 1.0% m/m (expected 0.8%; last -2.8%), rising 7.0% yr/yr (expected 2.0%; last -4.7%). February Retail Sales rose 1.5% m/m (last -0.7%) and Service Sector Output rose 0.5% m/m (last -0.9%).
  • Hong Kong's February Retail Sales were down 13.0% yr/yr (last -3.2%).
  • Australia's February Housing Credit was up 0.4% m/m (last 0.4%) and Private Sector Credit was up 0.5% m/m, as expected (last 0.5%). March ANZ Business Confidence dipped to 57.5 from 58.4 and March MI Inflation Gauge was up 0.7% m/m (last -0.2%).
  • Germany's February Retail Sales rose 0.8% m/m (expected 0.0%; last 0.7%), growing 4.9% yr/yr (last 4.0%). February Import Price Index was up 0.3% m/m (expected 0.0%; last 1.1%), rising 3.6% yr/yr (last 3.1%). Flash March CPI was up 0.3% m/m, as expected (last 0.4%), rising 2.2% yr/yr, as expected (last 2.3%).
  • U.K.'s February Net Lending to Individuals reached GBP4.60 bln (expected GBP4.90 bln; last GBP5.95 bln) and February Mortgage Approvals reached 65,480 (expected 66,000; last 66,040).
  • Italy's flash March CPI was up 0.4% m/m (expected 0.0%; last 0.2%), rising 2.0% yr/yr (expected 1.6%; last 1.6%).
  • Spain's January Current Account surplus reached EUR1.20 bln (last surplus of EUR1.67 bln).
• Commodities:
  • WTI Crude: +0.4% to $69.62/bbl
  • Gold: +1.1% to $3149.20/ozt
  • Copper: -1.9% to $5.035/lb
• Currencies:
  • EUR/USD: UNCH at 1.0820
  • GBP/USD: +0.1% to 1.2956
  • USD/CNH: -0.1% to 7.2577
  • USD/JPY: -0.3% to 149.39
• Data out Today:
  • 9:45 ET: March Chicago PMI (Briefing.com consensus 45.3; prior 45.5)