Bond Market Update

 Belly Leads Ahead of CPI

• U.S. Treasuries are on track for a higher start with the belly expected to lead the early strength after President Trump announced a 90-day pause on reciprocal tariffs to negotiate with countries that have not retaliated. The EU also announced that its tariff countermeasures will be suspended for 90 days to negotiate with the United States, Vietnam confirmed the start of official talks, and Japan dispatched an initial delegation to Washington that will set the ground for a visit from Economy Minister Akazawa in the coming weeks. Treasury futures climbed in early evening trade, followed by a slow reversal that eventually gave way to a return to overnight highs. Economic data released overnight was limited to a hotter-than-expected PPI report from Japan (0.4% m/m; expected 0.2%) and another deflationary CPI reading from China (-0.4% m/m). The U.S. session will also feature the release of March CPI (Briefing.com consensus 0.1%; prior 0.2%) at 8:30 ET and the U.S. Treasury will reopen $22 bln in 30-yr bonds this afternoon. Crude oil is facing renewed pressure while the U.S. Dollar Index is down 1.0% at 101.88.
• Yield Check:
  • 2-yr: -9 bps to 3.86%
  • 3-yr: -10 bps to 3.87%
  • 5-yr: -12 bps to 3.98%
  • 10-yr: -10 bps to 4.30%
  • 30-yr: -5 bps to 4.74%

• News:
  • National Economic Council Director Hassett said that a 10% global tariff will be a baseline that could only be lowered by an "extraordinary deal."
  • House Republicans are aiming to vote on the reconciliation resolution at 10:20 ET, but it remains unclear if they have enough votes to pass the resolution, according to CNN.
  • China Securities Daily called on the People's Bank of China to lower interest rates and the reserve requirement ratio.
  • The World Trade Organization forecast that merchandise trade between China and the U.S. could decrease by up to 80%.
  • New Zealand's Finance Minister Willis said that the Reserve Bank of New Zealand has plenty of room to cut rates if necessary.
  • Volkswagen affirmed its guidance for the year.
  • China's March CPI was down 0.4% m/m (expected -0.2%; last -0.2%), falling 0.1% yr/yr (expected 0.0%; last -0.7%). March PPI was down 2.5% yr/yr (expected -2.3%; last -2.2%).
  • Japan's March Bank Lending was up 2.8% yr/yr (expected 3.1%; last 3.0%). March PPI was up 0.4% m/m (expected 0.2%: last 0.2%), rising 4.2% yr/yr (expected 3.9%; last 4.1%).
  • Italy's February Industrial Production was down 0.9% m/m, as expected (last 2.5%), falling 2.7% yr/yr (expected -1.9%; last -0.8%).
• Commodities:
  • WTI Crude: -3.2% to $60.35/bbl
  • Gold: +2.0% to $3140.60/ozt
  • Copper: +4.2% to $4.367/lb
• Currencies:
  • EUR/USD: +1.1% to 1.1073 
  • GBP/USD: +0.9% to 1.2927
  • USD/CNH: -0.3% to 7.3220
  • USD/JPY: -1.3% to 145.48
• Data out Today:
  • 8:30 ET: March CPI (Briefing.com consensus 0.1%; prior 0.2%), Core CPI (Briefing.com consensus 0.3%; prior 0.2%), weekly Initial Claims (Briefing.com consensus 225,000; prior 219,000), and Continuing Claims (prior 1.903 mln)
  • 10:30 ET: Weekly natural gas inventories (prior +29 bcf)
  • 14:00 ET: March Treasury Budget (prior -$307.0 bln)
• Treasury Auctions:
  • 13:00 ET: $22 bln 30-yr Treasury bond reopening results