Bond Market Update

30-Yr Yield Nears January High

• U.S. Treasuries extended their losses to begin the week after a higher start in most tenors gave way to an intraday reversal. The trading day started with slim gains in the 5-yr note and shorter tenors while 10s and 30s lagged from the start, facing some impulse selling in immediate reaction to the CPI report for April, which was cooler than expected at the headline (0.2%; Briefing.com consensus 0.3%) and core (0.2%; Briefing.com consensus 0.3%) levels. As a result, the year-over-year headline CPI rate decelerated to 2.3% from 2.4% in March while core CPI was up 2.8% year-over-year for the second month in a row. Longer tenors quickly recovered from the post-CPI slip, but the entire complex began slipping from highs in the late morning. The selling continued into the afternoon alongside a rise in equities with the 10-yr yield settling at its highest level since mid-February while the 30-yr yield ended just six basis points below its January high (5.005%). Crude oil made another push toward its 50-day moving average (64.35) while the U.S. Dollar Index fell 0.8% to 101.01.
• Yield Check:
  • 2-yr: +2 bps to 4.02%
  • 3-yr: +2 bps to 4.01%
  • 5-yr: +2 bps to 4.12%
  • 10-yr: +4 bps to 4.50%
  • 30-yr: +6 bps to 4.94%

• News:
  • The joint committee on taxation expects the large reconciliation bill to increase deficit by $3.7 trln over ten years.
  • U.S. Trade Representative Greer said he will speak with India's officials today before traveling to South Korea.
  • Saudi Arabia aims to invest $600 bln in the United States.
  • The Bank of Japan's latest summary of opinions noted that the 2.0% inflation target is likely to be realized.
  • Thailand's government submitted a tariff proposal to U.S. officials.
  • India's April CPI was up 3.16% yr/yr (expected 3.27%; last 3.34%).
  • Australia's May Westpac Consumer Sentiment was up 2.2% (last -6.0%). March Building Approvals fell 8.8%, as expected (last -0.3%) and Private House Approvals fell 4.5% m/m, as expected (last 1.0%). April NAB Business Confidence ticked up to -1 from -2 and NAB Business Survey fell to 2 from 4.
  • Eurozone's May ZEW Economic Sentiment rose to 11.6 from -18.5 (expected -3.5).
  • Germany's May ZEW Economic Sentiment rose to 25.2 from -14.0 (expected 10.7) and ZEW Current Conditions fell to -82.0 from -81.2 (expected -77.0).
  • U.K.'s March Average Earnings Index + Bonus was up 5.5% yr/yr (expected 5.2%; last 5.7%). March three-month employment increased by 112,000 (expected 120,000; last 206,000) and March Unemployment Rate rose to 4.5% from 4.4%, as expected.
• Today's Data:
  • Total CPI was up 0.2% month-over-month (Briefing.com consensus 0.3%) following a 0.1% decline in March. Core CPI, which excludes food and energy, was also up 0.2% month-over-month (Briefing.com consensus 0.3%) following a 0.1% increase in March. On a year-over-year basis, total CPI was up 2.3%, versus 2.4% in March. That is the smallest 12-month increase since February 2021. Core CPI was up 2.8% year-over-year, unchanged from March.
    • The key takeaway from the report is the absence of any tariff shock in the headlines. Consumer prices, overall, were held in check, for the most part, including food and gasoline.
  • The NFIB Small Business Optimism Index fell to 95.8 in April from 97.4 in March.
• Commodities:
  • WTI crude: +2.9% to $63.73/bbl
  • Gold: +0.6% to $3248.80/ozt
  • Copper: +2.4% to $4.72/lb
• Currencies:
  • EUR/USD: +0.9% to 1.1186
  • GBP/USD: +1.0% to 1.3301
  • USD/CNH: UNCH at 7.1961
  • USD/JPY: -0.6% to 147.46
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 11.0%)
  • 10:30 ET: Weekly crude oil inventories (prior -1.11 mln)