Bond Market Update

Belly Paces Strong Start to April

• U.S. Treasuries are on track for a higher start with the belly expected to show early strength. The higher open follows a night that saw a steady rise in the futures market alongside other sovereign debt while global equities also advanced, rebounding from yesterday's weakness. Once again, the market received a big batch of data, headlined by final Manufacturing PMI readings for March. China's Caixin Manufacturing PMI (51.2; prior 50.8) showed unexpected improvement in March while Japan's Manufacturing PMI (49.1; prior 49.9) slipped deeper into contraction. Elsewhere, the eurozone's Manufacturing PMI (48.6) pointed to an ongoing contraction. The U.S. session will also feature the final Manufacturing PMI for March at 9:45 ET, followed by the March ISM Manufacturing Index (Briefing.com consensus 49.8%; prior 50.3%) at 10:00 ET. Crude oil holds a slight gain while the U.S. Dollar Index is up 0.1% at 104.34.
• Yield Check:
  • 2-yr: -6 bps to 3.85%
  • 3-yr: -8 bps to 3.83%
  • 5-yr: -8 bps to 3.90%
  • 10-yr: -9 bps to 4.16%
  • 30-yr: -8 bps to 4.53%

• News:
  • The Reserve Bank of Australia left its cash rate at 4.10%, as expected, but also acknowledged tariff-related uncertainty.
  • European Central Bank supervisory chief Buch warned eurozone banks to prepare for potential geopolitical shocks and liquidity risks, emphasizing the importance of robust risk management systems in the current uncertain environment while ECB President Lagarde repeated that tariffs could boost inflation and reduce growth.
  • Volkswagen CEO Blume said that the auto sector is preparing for a challenging quarter.
  • China's March Caixin Manufacturing PMI hit 51.2 (expected 50.6; last 50.8). 
  • Japan's February Jobs/applications ratio fell to 1.24 from 1.26 (expected 1.26) and February Unemployment Rate fell to 2.4% from 2.5% (expected 2.5%). Q1 Tankan All Big Industry Capex was up 3.1% (last 11.3%). Q1 Tankan Large Manufacturers Outlook Index fell to 12 from 14, as expected, and Q1 Tankan Large Non-Manufacturers Index rose to 35 from 33 (expected 33). March Manufacturing PMI hit 48.4 (expected 48.3; last 49.0).
  • South Korea's March trade surplus reached $4.99 bln (expected surplus of $6.10 bln; last surplus of $4.15 bln) as imports grew 2.3% yr/yr, as expected (last 0.2%) and exports rose 3.1% yr/yr (expected 3.5%; last 0.7%). March Manufacturing PMI hit 49.1 (last 49.9).
  • Singapore's Q1 URA Property Index was up 0.6% qtr/qtr (last 2.3%).
  • Australia's March Manufacturing PMI hit 52.1 (expected 52.6; last 50.4) and February Retail Sales rose 0.2% m/m (expected 0.3%; last 0.3%).
  • Eurozone's March Manufacturing PMI hit 48.6 (expected 48.7; last 47.6). Flash March CPI was up 0.6% m/m (last 0.4%), rising 2.2% yr/yr, as expected (last 2.3%). Flash March Core CPI was up 1.0% m/m (last 0.5%), rising 2.4% yr/yr (expected 2.5%; last 2.6%). February Unemployment Rate fell to 6.1% from 6.2% (expected 6.2%).
  • Germany's March Manufacturing PMI hit 48.3 (expected 48.4; last 46.5).
  • U.K.'s March Nationwide HPI was unchanged m/m (expected 0.2%; last 0.4%), rising 3.9% yr/yr (last 3.9%). March Manufacturing PMI hit 44.9 (expected 44.6; last 46.9).
  • France's March Manufacturing PMI hit 48.5 (expected 48.9; last 45.8).
  • Italy's March Manufacturing PMI hit 46.6 (expected 47.9; last 47.4) and February Unemployment Rate fell to 5.9% from 6.2% (expected 6.3%).
  • Spain's March Manufacturing PMI hit 49.5 (expected 49.8; last 49.7).
  • Swiss February Retail Sales rose 1.6% yr/yr (expected 1.5%; last 2.9%). March Manufacturing PMI hit 48.9 (expected 50.4; last 49.6).
• Commodities:
  • WTI Crude: +0.1% to $71.51/bbl
  • Gold: +0.3% to $3161.00/ozt
  • Copper: UNCH at $5.034/lb
• Currencies:
  • EUR/USD: -0.3% to 1.0782 
  • GBP/USD: -0.1% to 1.2896
  • USD/CNH: +0.3% to 7.2828
  • USD/JPY: -0.5% to 149.15
• Data out Today:
  • 9:45 ET: Final March S&P Global U.S. Manufacturing PMI (prior 49.8)
  • 10:00 ET: February Construction Spending (Briefing.com consensus 0.4%; prior -0.2%), February job openings (prior 7.740 mln), and March ISM Manufacturing Index (Briefing.com consensus 49.8%; prior 50.3%)