Bond Market Update

Belly Lags

• U.S. Treasuries are on track for a lower start with the belly expected to show slight relative weakness in the early going. Treasury futures began sliding last evening after President Trump said in a social media post that he will announce a major trade deal, later adding that the deal is with the United Kingdom. Treasury futures continued slipping through the night, reaching their lows in recent action. President Trump's announcement will take place at 10:00 ET, but before then, the market will receive a report on Preliminary Q1 Productivity (Briefing.com consensus -0.4%; prior 1.5%) and preliminary Q1 Unit Labor Costs (Briefing.com consensus 4.0%; prior 2.2%). Later in the day, the U.S. Treasury will sell $25 bln in 30-yr bonds. Crude oil is reclaiming yesterday's loss while the U.S. Dollar Index is up 0.5% at 100.06.
• Yield Check:
  • 2-yr: +3 bps to 3.82%
  • 3-yr: +3 bps to 3.79%
  • 5-yr: +4 bps to 3.91%
  • 10-yr: +3 bps to 4.31%
  • 30-yr: +3 bps to 4.80%

• News:
  • Chinese press speculated that Chinese bonds will enter a "slow bull market" on expectations of more easing.
  • Nikkei reported that Japan may include shipbuilding in a potential trade deal with the United States.
  • New Zealand's Prime Minister Luxon said that the budget will allocate more money to capital projects.
  • The Bank of England lowered its bank rate by 25-basis points to 4.25%, as expected.
  • Germany's March trade surplus reached EUR21.1 bln (expected surplus of EUR19.0 bln; last surplus of EUR17.9 bln) as imports fell 1.4% m/m (expected 0.4%; last 0.5%) and exports rose 1.1% m/m (expected 1.0%; last 1.8%). March Industrial Production was up 3.0% m/m (expected 0.9%; last -1.3%) but down 0.4% yr/yr (last -4.1%).
  • U.K.'s April Halifax House Price Index were up 0.3% m/m (expected 0.2%; last -0.5%), rising 3.2% yr/yr (expected 2.6%; last 2.9%).
  • Spain's March Industrial Production was up 1.0% yr/yr (last -1.9%).
• Commodities:
  • WTI Crude: +1.9% to $59.18/bbl
  • Gold: -1.3% to $3348.00/ozt
  • Copper: -1.2% to $4.604/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1294
  • GBP/USD: +0.3% to 1.3328
  • USD/CNH: +0.2% to 7.2388
  • USD/JPY: +0.6% to 144.63
• Data out Today:
  • 8:30 ET: Preliminary Q1 Productivity (Briefing.com consensus -0.4%; prior 1.5%), preliminary Q1 Unit Labor Costs (Briefing.com consensus 4.0%; prior 2.2%), weekly Initial Claims (Briefing.com consensus 238,000; prior 241,000), and Continuing Claims (prior 1.916 mln)
  • 10:00 ET: March Wholesale Inventories (Briefing.com consensus 0.5%; prior 0.3%)
  • 10:30 ET: Weekly natural gas inventories (prior +107 bcf)
• Treasury Auctions:
  • 13:00 ET: $25 bln 30-yr Treasury bond auction results