Bond Market Update

Padding Recent Gains

• U.S. Treasuries are on track for a higher start, looking for a continuation of their recent strength. Treasury futures spent the early part of the night in a sideways range, rising to highs over the past six hours or so. Overnight volume was significantly reduced by May Day closures in China, Hong Kong, Singapore, South Korea, India, and most of Europe. Still, there were some noteworthy developments, like the Bank of Japan's latest policy meeting. The central bank made no policy changes but lowered its domestic growth forecast for fiscal 2026 to 0.5% from 1.1% and lowered its outlook for fiscal 2027 to 0.7% from 1.0%. Today's session will feature the release of some manufacturing data with the final April S&P Global U.S. Manufacturing PMI (prior 50.2) set to be released at 9:45 ET, followed by the April ISM Manufacturing Index (Briefing.com consensus 47.9%; prior 49.0%) at 10:00 ET. Crude oil is falling toward its April low (55.12) while the U.S. Dollar Index is up 0.3% at 99.72.
• Yield Check:
  • 2-yr: -4 bps to 3.58%
  • 3-yr: -4 bps to 3.57%
  • 5-yr: -5 bps to 3.70%
  • 10-yr: -4 bps to 4.14%
  • 30-yr: -2 bps to 4.66%

• News:
  • Chinese press reported that the U.S. has reached out to Chinese officials for talks.
  • Thailand's central bank lowered its policy rate by 25 basis points to 1.75%, as expected.
  • EU officials are reportedly preparing to present their trade proposal to the U.S. next week.
  • Japan's April Manufacturing PMI hit 48.7 (expected 48.5; last 48.4) and April Household Confidence hit 31.2 (expected 33.9; last 34.1).
  • South Korea's April trade surplus reached $4.88 bln (expected surplus of $4.40 bln; last surplus of $4.92 bln) as imports fell 2.7% yr/yr (expected -6.9%; last 2.3%) and exports rose 3.7% yr/yr (expected -1.6%; last 3.0%).
  • Australia's March trade surplus reached AUD6.90 bln (expected surplus of AUD3.23 bln; last surplus of AUD2.852 bln) as imports fell 2.2% m/m (last 1.8%) and exports rose 7.6% m/m (last -4.2%). Q1 Import Price Index was up 3.3% qtr/qtr (expected 0.3%; last 0.2%) and Export Price Index was up 2.1% (last 3.6%). April Commodity Prices fell 6.1% yr/yr (last -7.2%).
  • U.K.'s April Manufacturing PMI hit 45.4 (expected 44.0; last 44.9). March Mortgage Approvals reached 64,310 (expected 64,000; last 65,090) and Mortgage Lending reached GBP12.96 bln (expected GBP3.80 bln; last GBP3.30 bln).
  • Swiss March Retail Sales rose 2.2% yr/yr (expected 1.9%; last 1.2%).
• Commodities: 
  • WTI Crude: -2.4% to $56.82/bbl
  • Gold: -3.0% to $3220.10/ozt
  • Copper: +1.0% to $4.654/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1318
  • GBP/USD: UNCH at 1.3323
  • USD/CNH: +0.1% to 7.2727
  • USD/JPY: +1.1% to 144.53
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 225,000; prior 222,000) and Continuing Claims (prior 1.841 mln)
  • 9:45 ET: Final April S&P Global U.S. Manufacturing PMI (prior 50.2)
  • 10:00 ET: March Construction Spending (Briefing.com consensus 0.3%; prior 0.7%) and April ISM Manufacturing Index (Briefing.com consensus 47.9%; prior 49.0%)
  • 10:30 ET: Weekly natural gas inventories (prior +88 bcf)