Bond Market Update

Calmer Nerves

• U.S. Treasuries had a good run today, logging most of their gains in the overnight trade as oil prices came down. There was some giveback during the cash session, but ultimately securities across the curve regrouped and settled today near their best levels of the session in terms of price and yield. The move was catalyzed by a 5.4% decline in WTI crude futures to $93.35/bbl, with reports suggesting some ships are getting through the Strait of Hormuz and that the U.S. is working on building an allied coalition to defend oil tankers attempting to traverse the strait. There was likely some short-covering activity helping things along today as well. Market participants will be attuned to overnight headlines pertaining to the war with Iran, as well as the RBA's rate decision and the start of the Fed's two-day FOMC meeting on Tuesday. Consistent with today's less nervous trade, the dollar lost ground to most major currencies. The U.S. Dollar Index was down 0.7% to 99.70.
• Yield Check:
  • 2-yr: -5 bps to 3.68%
  • 3-yr: -6 bps to 3.69%
  • 5-yr: -7 bps to 3.80%
  • 10-yr: -7 bps to 4.22%
  • 30-yr: -5 bps to 4.86%

• News:
  • The Trump administration plans to announce a multi-country coalition that will escort ships through the Strait of Hormuz. The announcement could be made this week. WSJ
  • President Trump in an interview says Iran is ready to negotiate a ceasefire, but he is not ready to make a deal because "the terms aren't good enough yet." He also said he is working with countries to secure the Strait of Hormuz. NBC News
  • Iranian Foreign Minister Abbas Araghchi says he is open to "any regional initiative" to end war, but no specific proposal has been made. Bloomberg
  • The U.S. attacked military sites on Iran's Kharg Island, and President Trump warned oil infrastructure on the island will be targeted unless the Strait of Hormuz is reopened. Iran threatened to attack oil facilities in the Middle East if Kharg oil infrastructure is targeted. Pentagon deploying 5,000 additional Marines and sailors to the Middle East. NBC News
  • Energy Secretary Chris Wright, in an interview, says the Iran war will "certainly come to an end in the next few weeks." He thinks the Strait of Hormuz will be opened in the "not too distant future." ABC News
  • President Trump might delay the summit with Chinese President Xi due to the Iran war. FT
  • Airlines urge Congress to fund DHS as airport disruptions continue. Reuters
  • FCC Chair Brendan Carr, in an interview, says broadcast licenses could be revoked over news coverage. CBS News
  • The Commerce Department plans to withdraw the rule on AI exports. Reuters
  • This week will feature 16 central bank policy decisions, including updates from the Fed, ECB, Bank of England, Swiss National Bank, and Bank of Japan
  • Finance ministers from Japan and South Korea issued a joint statement on defending their currencies from excessive weakness
  • NVIDIA (NVDA) CEO Jensen Huang at GTC conference: He said last year that he saw $500 billion of purchase orders for Blackwell and Rubin by 2026; he now sees at least $1 trillion by 2027
  • February Chinese Industrial Production 6.3% yr/yr (expected 5.3%; last 5.2%); February Retail Sales 2.8% yr/yr (expected 2.6%; last 0.9%); February Fixed Asset Investment 1.8% yr/yr (expected -5.0%; last -3.8%)
• Today's Data:
  • March Empire Manufacturing (Actual -0.2; Briefing.com consensus 0.5; prior 7.1)
  • Industrial production increased 0.2% month-over-month in February (Briefing.com consensus: 0.4%) following an unrevised 0.7% increase in January. The capacity utilization rate was 76.3% (Briefing.com consensus: 76.0%), unchanged from an upwardly revised 76.3% (from 76.2%) in January.
    • The key takeaway from the report is that it marked the fourth straight monthly increase in industrial production, although that streak masks some otherwise tepid output. At 102.6 percent of its 2017 average, total industrial production was just 1.4% above its year-earlier level.
  • March NAHB Housing market Index (Actual 38; prior revised to 37 from 36)
• Commodities:
  • WTI Crude: -5.4% to $93.35/bbl
  • Gold: -1.2% to $5000.30/ozt
  • Copper: +1.2% to $5.83/lb
• Currencies:
  • EUR/USD: +0.9% to 1.1520
  • GBP/USD: +0.8% to 1.3336
  • USD/CNH: -0.2% to 6.8876
  • USD/JPY: -0.5% to 158.93
• The Day Ahead:
  • 10:00 ET: February Pending Home Sales Index (Briefing.com consensus: -0.8%; prior -0.8%)
  • 13:00 ET: $13 billion 20-yr bond reopening