Bond Market Update

Resistance Found Near March Highs Ahead of Tariff News

• U.S. Treasuries retreated on Wednesday, pulling back from their highs from March. The trading day started with modest gains as the global markets awaited today's 16:00 ET announcement from President Trump regarding reciprocal tariffs. The early gains pressured yields on longer tenors back to their lows from March with the market rising despite the release of a solid ADP Employment Change report for March (155,000; Briefing.com consensus 120,000). However, the entire complex reversed as equities started the Wall Street session with a quick recovery of their opening losses. The bounce in equities lost some steam in the afternoon while Treasuries inched up off lows in late trade. The day ended without certainty about the exact structure of the impending tariffs, but Sky News reported that rate tiers of 10%, 15%, and 20% will be announced by President Trump. Crude oil finished higher after overcoming an overnight loss while the U.S. Dollar Index fell 0.5% to 103.79.
• Yield Check:
  • 2-yr: +4 bps to 3.90%
  • 3-yr: +4 bps to 3.89%
  • 5-yr: +4 bps to 3.95%
  • 10-yr: +4 bps to 4.20%
  • 30-yr: +4 bps to 4.55%

• News:
  • Germany's banking association lowered its domestic growth forecast for 2025 to 0.2% from 0.7%.
  • Italy's business lobby lowered its domestic forecast to 0.6% from 0.9% with a worst-case scenario projecting growth of just 0.2%.
  • Greece plans to increase its military spending by EUR25 bln over the next 12 years.
  • Bank of Japan Governor Ueda warned that tariffs could have a significant impact on global trade and economic growth.
  • South Korea's acting President Han called for calm ahead of Friday's court decision about impeaching former President Yoon.
  • Japan's March Monetary Base was down 3.2% yr/yr (expected -1.5%; prior -1.9%).
  • South Korea's March CPI was up 0.2% m/m, as expected (last 0.3%), rising 2.1% yr/yr (expected 2.0%; prior 2.0%).
  • India's March Manufacturing PMI hit 58.1 (expected 57.6; last 56.3).
  • Singapore's March Manufacturing PMI hit 50.6 (prior 50.7).
  • Australia's March AIG Construction Index fell to -19.3 from -3.7 and AIG Manufacturing Index fell to -29.7 from -8.2. February Building Approvals were down 0.3% m/m (expected -1.4%; last 6.9%) but up 9.1% yr/yr (last 9.4%). February Private House Approvals rose 1.0% m/m (last 1.4%).
  • New Zealand's February Building Consents rose 0.7% m/m (last 2.6%).
  • France's February government budget deficit reached EUR40.3 bln (expected deficit of EUR30.2 bln; last deficit of EUR17.3 bln).
  • Spain's March Unemployment decreased by 13,300 (expected -2,500; last -6,000).
• Today's Data:
  • Factory orders rose 0.6% month-over-month in February (Briefing.com consensus 0.4%) after increasing an upwardly revised 1.8% (from 1.7%) in January. Excluding transportation, factory orders were up 0.4% after increasing 0.3% in January. Shipments of manufactured goods were up 1.2% after increasing 0.7% in January.
    • The key takeaway from the report is new orders for nondefense capital goods excluding aircraft, which are considered a proxy for business spending, decreased 0.2% despite the headline beat.
  • The ADP Employment Change report pointed to the addition of 155,000 nonfarm payrolls in March (Briefing.com consensus 120,000) while the February reading was revised up to 84,000 from 77,000.
  • The weekly MBA Mortgage Index fell 1.6% to follow last week's 2.0% decrease. The Refinance Index was down 5.6% while the Purchase Index rose 1.5%.
  • Weekly crude oil inventories increased by 6.17 mln barrels after decreasing by 3.34 mln barrels a week ago.
• Commodities:
  • WTI crude: +0.7% to $71.71/bbl
  • Gold: +0.6% to $3166.30/ozt
  • Copper: +0.4% to $5.05/lb
• Currencies:
  • EUR/USD: +0.6% to 1.0855
  • GBP/USD: +0.5% to 1.2981
  • USD/CNH: UNCH at 7.2776
  • USD/JPY: +0.2% to 149.97
• The Day Ahead:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 224,000; prior 224,000), Continuing Claims (prior 1.856 mln), and February Trade Balance (Briefing.com consensus -$121.0 bln; prior -$131.4 bln)
  • 10:00 ET: March ISM Services (Briefing.com consensus 53.2%; prior 53.5%)
  • 10:30 ET: Weekly natural gas inventories (prior +37 bcf)