Bond Market Update

2-Yr Yield Settles at Fresh 2026 High

• U.S. Treasuries faced renewed pressure on Wednesday, which sent yields on 10s and 30s to their highest levels since early February while the 2-yr yield settled at its highest level since late September. The market faced pressure from the start after a night that saw a resumption of upward pressure on the price of oil and news of ongoing shipping difficulties in the Middle East. The IEA confirmed that member countries will release 400 million barrels of oil from their reserves, but the news was largely priced in since the recommendation was made known yesterday. Treasuries extended their starting losses after the February CPI report did not feature any pleasant disinflationary surprises ahead of what is expected to be a hot inflation report for March. Instead, February CPI was right in line with expectations, keeping the year-over-year growth rate at 2.4% while core CPI remained at 2.5% year-over-year. Treasuries reached lows shortly after the U.S. Treasury reopened $39 bln in 10-yr notes to weak demand, but a shallow bounce lifted action off lows during the final hour. However, even with that late uptick, yields on all tenors finished the day above their respective 200-day moving averages. Crude oil climbed toward $87/bbl while the U.S. Dollar Index rose 0.4% to 99.23.
• Yield Check:
  • 2-yr: +6 bps to 3.63%
  • 3-yr: +6 bps to 3.65%
  • 5-yr: +7 bps to 3.78%
  • 10-yr: +7 bps to 4.21%
  • 30-yr: +9 bps to 4.86%

• News:
  • JPMorgan has started marking down some private credit portfolios linked to software debt, which will reduce the borrowing ability of affected companies.
  • Bloomberg reported that Cliffwater's flagship private credit fund received redemption requests exceeding 7%.
  • Honeywell (HON) sold $15.5 bln worth of senior notes overnight, adding to yesterday's big corporate debt offering slate.
  • South Korea's exports were up 55.6% yr/yr through the first ten days of March with chip exports spiking 175.9% to a record of $7.6 bln.
  • South Korea joined the International Energy Agency.
  • The Reserve Bank of Australia is expected to announce a rate hike next week after hawkish comments from Deputy Governor Hauser.
  • The U.K.'s Office for Budget Responsibility expects British inflation to end the year at 3% if energy prices remain at their current levels.
  • European Central Bank policymakers Nagel, Kazimir, and Kazaks spoke in favor of holding policy steady at next week's ECB meeting.
  • Japan's February PPI was down 0.1% m/m (expected 0.1%; last 0.2%) but up 2.0% yr/yr (expected 2.2%; last 2.3%).
  • Germany's February CPI was up 0.2% m/m, as expected (last 0.1%), rising 1.9% yr/yr, as expected (last 2.1%)
  • Spain's January Retail Sales rose 4.0% yr/yr (last 2.8%).
• Today's Data:
  • Total CPI increased 0.3% month-over-month in February (Briefing.com consensus 0.3%) and was up 2.4% year-over-year, versus 2.4% for the 12 months ending in January. Core CPI, which excludes food and energy, increased 0.2% month-over-month (Briefing.com consensus 0.2%) and was up 2.5% year-over-year, versus 2.5% for the 12 months ending in January.
    • The key takeaway from the report is that it matched expectations at the headline and core levels, which is mildly positive, given the recent surge in energy prices that will increase the market's expectations for a hotter reading in March.
  • The weekly MBA Mortgage Index was up 3.2% after increasing 11.0% a week ago. The Purchase Index was up 7.8% while the Refinance Index increased 0.5%.
  • The Treasury reported a $307.5 billion deficit for February (Briefing.com consensus -$170.0 bln), which was much wider than expected and it was a bit wider than the $307.0 billion deficit reported for February 2025. Receipts totaled $313.1 billion, while outlays reached $620.6 billion.
    • The key takeaway from the report is that while the February deficit was much larger than expected, the year-to-date deficit is nearly $150 billion smaller than it was at this time last year, reflecting some fiscal improvement.
  • Weekly crude oil inventories decreased by million barrels after increasing by 3.48 million barrels a week ago.
  • $39 bln 10-year Treasury note reopening results (prior 12-auction average):
    • High yield: 4.217% (4.240%).
    • Bid-to-cover: 2.45 (2.53).
    • Indirect bid: 74.5% (70.7%).
    • Direct bid: 12.8% (19.3%).
• Commodities:
  • WTI crude: +3.6% to $86.88/bbl
  • Gold: -1.2% to $5179.40/ozt
  • Copper: -1.0% to $5.89/lb
• Currencies:
  • EUR/USD: -0.4% to 1.1569
  • GBP/USD: UNCH at 1.3413
  • USD/CNH: UNCH at 6.8768
  • USD/JPY: +0.6% to 158.95
• The Day Ahead:
  • 8:30 ET: January Housing Starts (Briefing.com consensus 1.340 mln; prior 1.404 mln) and Building Permits (Briefing.com consensus 1.392 mln; prior 1.448 mln), January Trade Balance (Briefing.com consensus -$67.9 bln; prior -$70.3 bln), weekly Initial Claims (Briefing.com consensus 215,000; prior 213,000), and Continuing Claims (prior 1.868 mln)
  • 10:00 ET: January Factory Orders (prior -0.7%)
  • 10:30 ET: Weekly natural gas inventories (prior -132 bcf)
• Treasury Auctions:
  • 13:00 ET: $22 bln 30-yr Treasury bond reopening results