Bond Market Update

Quiet in Front of FOMC

• U.S. Treasuries saw yields fall back from higher levels in the overnight trade and close the regular session slightly lower than yesterday's settlement. Overall, it was a quiet trade in today's market, which absorbed an expected rate hike from the Reserve Bank of Australia, higher oil prices, and a report of stronger-than-expected pending home sales in February. Worries about slower growth and hesitation in front of Wednesday's FOMC decision and press conference ultimately won out as the Treasury market's driving influence.
• Yield Check:
  • 2-yr: -1 bp to 3.67%
  • 3-yr: -1 bp to 3.68%
  • 5-yr: -1 bp to 3.79%
  • 10-yr: -2 bps to 4.20%
  • 30-yr: -1 bp to 4.85%

• News:
  • President Trump says has great support from the Middle East - Qatar, Saudi Arabia, UAE, Bahrain. Essentially no support from NATO allies. NATO is making 'foolish' mistake. We don't need them, but they should have been there. Not good for partnership if not going to help.
  • President Trump said the U.S. has asked China to delay his meeting with President Xi by a month or so because of his need to attend to the war with Iran
  • Germany, Japan, and Australia are unlikely to help with the Strait of Hormuz, but the UK and France are assessing possible action. WSJ
  • Israel killed Iran security chief Ali Larijani. NBC News
  • As expected, the Reserve Bank of Australia raised its cash rate by 25 basis points to 4.10%, but it was a close 5-4 vote
  • EU aiming to restart process to ratify trade deal with U.S., according to Bloomberg
  • Eurozone's March ZEW Economic Sentiment -8.5 (expected 26.5; prior 39.4)
• Today's Data:
  • February Pending Home Sales increased 1.8% (Briefing.com consensus: -0.8%; prior revised to -1.0% from -0.8%)
  • $13 bln 20-yr bond reopening saw a high yield of 4.817% and a 2.76 bid-to-cover ratio that exceeded the prior 12-auction average of 2.64
• Commodities:
  • WTI Crude: +2.9% to $96.05/bbl
  • Gold: +0.1% to $5007.50/ozt
  • Copper: -1.2% to $5.76/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1537
  • GBP/USD: +0.3% to 1.3352
  • USD/CNH: -0.1% to 6.8832
  • USD/JPY: -0.1% to 158.94
• The Day Ahead:
  • 07:00 ET: MBA Mortgage Applications Index (prior 3.2%)
  • 08:30 ET: February PPI (Briefing.com consensus: 0.3%; prior 0.5%) and core PPI (Briefing.com consensus: 0.4%; prior 0.8%)
  • 10:00 ET: January Factory Orders (prior -0.7%)
  • 10:30 ET: EIA Crude Oil Inventories (prior +3.82M)
  • 14:00 ET: FOMC Decision
  • 14:30 ET: Fed Chair Powell press conference
  • 16:00 ET: January Net Long-Term TIC Flows (prior $28.0B)