Bond Market Update

Short End Ahead

• U.S. Treasuries are on track for a mixed start with the short end expected to show early strength while the long bond is on course to begin the day with a slight loss after underperforming on Monday. Treasury futures faced some light selling during the Asian session, which again lacked the participation of some major markets (Japan and South Korea) that remained on holiday, but the slim losses gave way to a rebound during the European session, which has seen some weakness in equities amid ongoing trade uncertainty. Final April Services PMI readings from the region were mostly better than expected with eurozone's Services PMI (50.1) indicating a minimal expansion in activity. Economic data during the U.S. session will be limited to the 8:30 ET release of March Trade Balance (Briefing.com consensus -$127.5 bln; prior -$122.7 bln) and the U.S. Treasury will continue this week's note and bond auction slate with a $42 bln 10-yr note sale at 13:00 ET. Crude oil is on the rise while the U.S. Dollar Index is down 0.3% at 99.56.
• Yield Check:
  • 2-yr: -3 bps to 3.81%
  • 3-yr: -4 bps to 3.78%
  • 5-yr: -1 bp to 3.93%
  • 10-yr: UNCH at 4.34%
  • 30-yr: UNCH at 4.83%

• News:
  • The Taiwanese dollar pulled back against the greenback after surging nearly 10% against the U.S. currency between Friday and Monday.
  • Japanese press reported that the U.S. rejected Japan's request for a full exemption from reciprocal tariffs, but there is potential for the rate to be lowered.
  • EU Trade Commissioner Sefcovic warned that ongoing U.S. investigations could lead to tariffs covering nearly all EU exports, calling the situation "not acceptable" while stressing the need for a negotiated solution.
  • China's April Caixin Services PMI hit 50.7 (expected 51.7; last 51.9).
  • India's April Services PMI hit 58.7 (expected 59.1; last 58.5).
  • Australia's March Building Approvals were down 8.8% m/m (expected -1.7%; last -0.2%) but up 9.9% yr/yr (expected 9.1%; last 10.3%). March Private House Approvals were down 4.5% m/m (last 1.1%).
  • Eurozone's April Services PMI hit 50.1 (expected 49.7; last 51.0). March PPI was down 1.6% m/m (expected -1.4%; last 0.2%) but up 1.9% yr/yr (expected 2.0%; last 3.0%).
  • Germany's April Services PMI hit 49.0 (expected 48.8; last 50.9).
  • U.K.'s April Services PMI hit 49.0 (expected 48.9; last 52.5).
  • France's March Industrial Production was up 0.2% m/m (expected 0.4%; last 1.0%). April Services PMI hit 47.3 (expected 46.8; last 47.9).
  • Swiss April Unemployment Rate remained at 2.8%, as expected.
  • Italy's April Services PMI hit 52.9 (expected 51.3; last 52.0).
  • Spain's April Unemployment decreased by 67,400 (expected 6,500; last -13,300). April Services PMI hit 53.4 (expected 53.9; last 54.7).
• Commodities:
  • WTI Crude: +2.1% to $58.35/bbl
  • Gold: +1.9% to $3384.00/ozt
  • Copper: +0.3% to $4.713/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1331
  • GBP/USD: +0.6% to 1.3370
  • USD/CNH: +0.2% to 7.2098
  • USD/JPY: -0.6% to 142.83
• Data out Today:
  • 8:30 ET: March Trade Balance (Briefing.com consensus -$127.5 bln; prior -$122.7 bln)
• Treasury Auctions:
  • 13:00 ET: $42 bln 10-yr Treasury note auction results