Bond Market Update

Shorter Tenors Trim Recent Losses

• U.S. Treasuries were mixed on Tuesday with 5s and shorter tenors recording modest gains while the long bond lagged after outperforming during the market's recent slide from February highs. Shorter tenors outperformed from the start after a night that saw some improvement in overall sentiment thanks to a continuation of crude oil's reversal from its highest level since mid-2022. Oil fell as low as $76.73/bbl after President Trump said last night that the Iran campaign is ahead of schedule and should end soon. However, there were still some persistent worries about shipping disruptions as the day went on. Treasuries reached highs in late morning action but faced some pressure after a weak $58 bln 3-yr note sale. The market faced additional selling during the final hour of trade after CBS reported that U.S. officials are seeing evidence of Iran deploying naval mines in the Strait of Hormuz. That selling sent the 10-yr note back to its unchanged level while shorter tenors trimmed their gains. Crude oil fell back below $85/bbl, turning negative for the week, while the U.S. Dollar Index fell 0.4% to 98.80.
• Yield Check:
  • 2-yr: -2 bps to 3.57%
  • 3-yr: -2 bps to 3.59%
  • 5-yr: -2 bps to 3.72%
  • 10-yr: UNCH at 4.14%
  • 30-yr: +3 bps to 4.77%

• News:
  • Amazon (AMZN) launched an eleven-part senior unsecured note offering, seeking to raise up to $30 bln and EUR10 bln with debt maturities ranging from two years to 50 years.
  • European Central Bank policymaker Muller said that the likelihood of a rate hike has increased, but there is no need to rush to a decision.
  • China's February trade surplus reached $90.98 bln (expected surplus of $177.4 bln; last surplus of $114.1 bln) as imports grew 13.8% yr/yr (expected 6.3%; last 5.7%) and exports rose 39.6% yr/yr (expected 7.1%; last 6.6%).
  • Japan's Q4 GDP expanded 0.3% qtr/qtr (expected 0.1%; last -0.6%), growing 1.3% yr/yr (expected 0.2%; last -2.3%). Q4 GDP Price Index was up 3.4% yr/yr, as expected (last 3.4%). January Household Spending was down 2.5% m/m (expected 0.8%; last -2.2%), falling 1.0% yr/yr (expected 2.4%; last -2.6%). February Machine Tool Orders jumped 24.2% yr/yr (expected 25.3%; last 10.6%).
  • South Korea's Q1 GDP contracted 0.2% qtr/qtr (expected -0.3%; last 1.3%) but was up 1.6% yr/yr (expected 1.7%; last 1.8%).
  • Australia's Westpac Consumer Sentiment was up 1.2% m/m (last -2.6%). February NAB Business Confidence fell to -1 from 4 and February NAB Business Survey remained at 7. January Building Approvals were down 7.2% m/m, as expected (last -14.9%), falling 15.7% yr/yr (expected 8.1%; last 0.4%). January Private House Approvals rose 1.1% m/m, as expected (last 0.4%).
  • Germany's January trade surplus reached EUR21.2 bln (expected surplus of EUR15.4 bln; last surplus of EUR17.4 bln) as imports fell 5.9% m/m (last 1.3%) and exports decreased 2.3% m/m (last 3.9%).
  • France's January trade deficit reached EUR1.8 bln (expected deficit of EUR5.2 bln; last deficit of EUR4.3 bln) and January Current Account surplus reached EUR2.1 bln (last surplus of EUR100 mln).
• Today's Data: 
  • Existing home sales increased 1.7% month-over-month in February to a seasonally adjusted annual rate of 4.09 million (Briefing.com consensus 3.88 million) from a revised 4.02 million (from 3.91 million) in January. Sales were down 1.4% on a year-over-year basis.
    • The key takeaway from the report is that sales increased despite continued pressure on affordability as median prices grew for the 32nd month in a row.
  • The NFIB Small Business Optimism Index fell to 98.8 in February (Briefing.com consensus 99.5) from 99.3 in January.
  • $58 bln 3-year Treasury note auction results (prior 12-auction average):
    • High yield: 3.579% (3.702%).
    • Bid-to-cover: 2.55 (2.62).
    • Indirect bid: 59.8% (63.2%).
    • Direct bid: 20.7% (23.6%).
• Commodities: 
  • WTI crude: -11.5% to $83.85/bbl
  • Gold: +2.5% to $5242.50/ozt
  • Copper: +2.1% to $5.95/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1622
  • GBP/USD: -0.1% to 1.3428 
  • USD/CNH: -0.1% to 6.8749
  • USD/JPY: +0.1% to 157.88
• The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 11.0%)
  • 8:30 ET: February CPI (Briefing.com consensus 0.3%; prior 0.2%) and Core CPI (Briefing.com consensus 0.2%; prior 0.3%) 
  • 10:30 ET: Weekly crude oil inventories (prior +3.48 mln)
  • 14:00 ET: February Treasury Budget (Briefing.com consensus -$170.0 bln; prior -$94.6 bln)
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results at 13:00 ET