Bond Market Update

 Looking to Bounce Again

• U.S. Treasuries are on track for a modestly higher start, looking to put an end to their three-day skid. Yesterday's quiets session was followed by an overnight barrage of news and economic data. President Trump said that India offered to remove all tariffs on goods from the United States, according to Bloomberg, while Japan may agree to re-import vehicles made in the United States into Japan. Economic data released overnight showed stronger-than-expected Q1 GDP growth in the U.K. (0.7%; expected 0.6%), but the market remains concerned about the future impact of trade tensions. The U.S. session will also feature a full slate of data, including April PPI (Briefing.com consensus 0.3%; prior -0.4%), Core PPI (Briefing.com consensus 0.3%; prior -0.1%), and April Retail Sales (Briefing.com consensus 0.2%; prior 1.4%) at 8:30 ET. Crude oil has slumped back to $61/bbl after a top Iranian official said that Iran is ready to sign a nuclear deal with the United States in exchange for sanction relief. The U.S. Dollar Index is down 0.1% at 100.92.
• Yield Check:
  • 2-yr: -2 bps to 4.03%
  • 3-yr: -2 bps to 4.03%
  • 5-yr: -2 bps to 4.14%
  • 10-yr: -1 bp to 4.52%
  • 30-yr: -1 bp to 4.96%

• News:
  • China Securities Journal noted that analysts see room for more reserve requirement ratio cuts by the end of the year.
  • Japan's trade negotiator Akazawa will visit Washington for trade talks next week.
  • Officials from South Korea and the U.S. reportedly discussed foreign exchange policy during a meeting on May 5.
  • European Central Bank Vice President de Guindos warned that escalating trade tensions could lead to a trade war with "significant negative consequences for global growth, inflation and asset prices." 
  • Japan's April Machine Tool Orders grew 7.7% yr/yr (last 11.4%). · South Korea's April trade surplus reached $4.88 bln, as expected (last surplus of $4.92 bln) as imports fell 2.7% yr/yr, as expected (last 2.3%) and exports rose 3.7% yr/yr, as expected (last 3.0%).
  • Australia's April employment increased by 89,000 (expected 20,900; last 36,400) and full employment increased by 59,500 (last 12,200). April Unemployment Rate remained at 4.1%, as expected, and April Participation Rate rose to 67.1% from 66.8% (expected 66.8%). April MI Inflation Expectations slowed to 4.1% from 4.2%.
  • New Zealand's April FPI was up 0.8% m/m (last 0.5%).
  • Eurozone's Q1 GDP expanded 0.3% qtr/qtr (expected 0.4%; last 0.2%), growing 1.2% yr/yr, as expected (last 1.2%). Q1 employment increased by 0.3% qtr/qtr (expected 0.1%; last 0.1%), rising 0.6% yr/yr (expected 0.8%; last 0.7%). March Industrial Production was up 2.6% m/m (expected 1.9%; last 1.1%), rising 3.6% yr/yr (expected 2.5%; last 1.0%).
  • Germany's April WPI was down 0.1% m/m (expected +0.2%; last -0.2%), but up 0.8% yr/yr (last +1.3%).
  • U.K.'s Q1 GDP was up 0.7% qtr/qtr (expected +0.6%; last +0.1%), growing 1.3% yr/yr (expected +1.2%; last +1.5%). Q1 Business Investment increased 5.9% qtr/qtr (expected +0.4%; last -1.9%), rising 8.1% yr/yr (last +1.8%). March Industrial Production was down 0.7% m/m (expected -0.6%; last +1.7%), falling 0.7% yr/yr (expected -0.9%; last +0.4%). March Manufacturing Production was down 0.8% m/m (expected -0.8%; last +2.4%), falling 0.8% yr/yr (expected -0.5%; last +0.5%). March Construction Output was up 0.5% m/m (expected +0.2%; last +0.2%), rising 1.4% yr/yr (expected +1.2%; last +1.4%). March trade deficit reached GBP19.87 bln (expected deficit GBP19.10 bln; last deficit GBP20.96 bln).
  • France's April CPI was up 0.6% m/m (expected +0.5%; last +0.2%), rising 0.8% yr/yr (expected +0.8%; last +0.8%).
  • Swiss April PPI was up 0.1% m/m (expected +0.2%; last +0.1%) but was down 0.5% yr/yr (last -0.1%).
• Commodities:
  • WTI Crude: -3.3% to $61.07/bbl
  • Gold: -0.3% to $3179.00/ozt
  • Copper: -0.1% to $4.647/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1187
  • GBP/USD: +0.1% to 1.3274
  • USD/CNH: UNCH at 7.2089
  • USD/JPY: -0.4% to 145.98
• Data out Today:
  • 8:30 ET: April PPI (Briefing.com consensus 0.3%; prior -0.4%), Core PPI (Briefing.com consensus 0.3%; prior -0.1%), April Retail Sales (Briefing.com consensus 0.2%; prior 1.4%), Retail Sales ex-auto (Briefing.com consensus 0.5%; prior 0.5%), May Empire State Manufacturing (Briefing.com consensus 1.0; prior -8.1), May Philadelphia Fed (Briefing.com consensus -6.0; prior -26.4), weekly Initial Claims (Briefing.com consensus 226,000; prior 228,000), and Continuing Claims (prior 1.879 mln)
  • 9:15 ET: April Industrial Production (Briefing.com consensus 0.3%; prior -0.3%) and Capacity Utilization (Briefing.com consensus 77.9%; prior 77.8%)
  • 10:00 ET: May Business Inventories (Briefing.com consensus 0.2%; prior 0.2%) and May NAHB Housing Market Index (Briefing.com consensus 40; prior 40)
  • 10:30 ET: Weekly natural gas inventories (prior +104 bcf)