Bond Market Update

Lower Start Gives Way to Daylong Bounce

• U.S. Treasuries started the week on a solid note, sending the 2-yr yield toward its lowest settlement of the month. The trading day started in quiet fashion with modest losses across the curve after a night that saw a limited flow of market moving news. That said, Spain, Portugal, and parts of France were mired in a blackout for the bulk of the day and growing tension between India and Pakistan present a potential geopolitical flashpoint after Pakistan's defense minister said today that his country expects an imminent military incursion from India. Treasuries faced some pressure during the initial hour of action, but they bounced swiftly, continuing higher as the day went on. The advance left the 2-yr yield just a basis point above its settlement level from April 4 while the 10-yr yield returned to its 200-day moving average (4.222%). Tomorrow will see the release of the Consumer Confidence report for April (Briefing.com consensus 88.3; prior 92.9), leading up to Wednesday's release of advance Q1 GDP (Briefing.com consensus 0.4%; prior 2.4%). Crude oil slid to its lowest level in nearly two weeks while the U.S. Dollar Index fell 0.4% to 99.05.
• Yield Check:
  • 2-yr: -8 bps to 3.68%
  • 3-yr: -8 bps to 3.68%
  • 5-yr: -7 bps to 3.82%
  • 10-yr: -5 bps to 4.22%
  • 30-yr: -4 bps to 4.69%

• News:
  • The U.S. Treasury announced at the cash close that borrowing in Q2 is expected to reach $514 bln, $391 bln more than what was projected in February. Borrowing in Q3 is expected to reach $554 bln.
  • The People's Bank of China reassured that the reserve requirement ratio and interest rates will be lowered at the appropriate time.
  • China is reportedly looking to consolidate more than 200 of its semiconductor companies into ten big entities.
  • Australia's Labor party is leading ahead of next weekend's election, but ratings agencies have said that the party's spending plan will put the country's AAA credit rating in jeopardy.
  • French officials ruled out pushing for a broad EU-U.S. free trade deal in the short term.
  • European Central Bank policymaker Villeroy de Galhau stated that the central bank has room for further rate cuts as inflation nears target and suggested Europe could become an "anchor of stability" amid U.S. volatility.
  • China's March Industrial Profit was up 0.8% YTD (last -0.3%).
  • Hong Kong's March trade deficit reached $45.4 bln (last deficit of $36.3 bln) as imports grew 16.6% m/m (last 11.8%) and exports rose 18.5% m/m (last 15.4%).
  • India's March Industrial Production was up 3.0% yr/yr (expected 3.3%; last 2.9%) and Manufacturing Production was up 3.0% m/m (last 2.9%).
  • Singapore's Q1 Unemployment Rate rose to 2.1% from 1.9%.
  • U.K.'s April CBI Distributive Trades Survey rose to -8 from -41 (expected -21).
  • Spain's March Retail Sales rose 3.6% yr/yr (last 3.6%) and Q1 Unemployment Rate rose to 11.36% from 10.61% (expected 10.70%).
• Commodities:
  • WTI crude: -1.6% to $62.07/bbl
  • Gold: +1.5% to $3348.30/ozt
  • Copper: +0.6% to $4.88/lb
• Currencies:
  • EUR/USD: +0.5% to 1.1417
  • GBP/USD: +0.9% to 1.3427
  • USD/CNH: UNCH at 7.2843
  • USD/JPY: -1.1% to 142.08
• The Day Ahead:
  • 8:30 ET: Advance March International Trade in Goods (prior -$147.9 bln), advance March Retail Inventories (prior 0.1%), advance March Wholesale Inventories (prior 0.3%)
  • 9:00 ET: February FHFA Housing Price Index (prior 0.2%) and February S&P Case Shiller Home Price Index (Briefing.com consensus 4.7%; prior 4.7%)
  • 10:00 ET: April Consumer Confidence (Briefing.com consensus 88.3; prior 92.9) and March Job Openings (prior 7.568 mln)