Bond Market Update

Yields Up

• U.S. Treasuries saw continued selling pressure in the wake of Fed Chair Powell's remarks at his press conference, which featured an acknowledgment that the Fed has not made enough progress driving down goods inflation. The takeaway for participants is that the next rate cut is going to be later rather than sooner, and that is being priced into the fed funds futures market. According to the CME FedWatch Tool, the probability of a 25-basis-point cut to 3.25-3.50% doesn't exceed 50% until the June 2027 FOMC meeting. The jump in energy prices today, which follows an Iranian attack on Qatar's LNG facilities at Ras Laffan, has compounded the inflation concerns that are driving up yields across global bond markets. On the heels of yesterday's FOMC news, the Bank of Japan left its key policy rate unchanged at 0.75%, as expected, with the uncertainty about the Middle East unrest contributing to the decision. It was an 8-1 vote. The lone dissenter (Takata) wanted a 25-basis-point hike. The Swiss National Bank kept its key policy rate unchanged at 0.00%, as expected. Sweden's Riksbank said its repo rate is not likely to change for some time. The Bank of England and the ECB will be out with rate decisions shortly. Both are expected to leave their key policy rates unchanged.
• Yield Check:
  • 2-yr: +7 bps to 3.82%
  • 3-yr: +7 bps to 3.82%
  • 5-yr: +4 bps to 3.90%
  • 10-yr: +3 bps to 4.29%
  • 30-yr: +2 bps to 4.90%

• News:
  • President Trump says U.S. knew nothing about Israel's attack on South Pars Gas Field in Iran; says no more attacks will be made by Israel pertaining to South Pars Field unless Iran decides to attack Qatar; says if Iran does attack Qatar U.S. will "massively blow up the entirety" of the South Pars Gas Field "at an amount of strength and power that Iran has never seen or witnessed before"
  • Qatar says Iranian missiles caused extensive damage at a key hub for liquified natural gas. WSJ
  • The Trump administration is considering deploying thousands of additional soldiers to the Middle East and is also considering sending ground forces to Iran's Kharg Island. Reuters
  • EU natural gas prices surged more than 20%. WSJ
  • Freddie Mac & Fannie Mae (FNMA) remove certain homeowners insurance requirements that will reduce costs
  • The Bank of Japan left its key policy rate unchanged at 0.75%, as expected, with the uncertainty about the Middle East unrest contributing to the decision. It was an 8-1 vote. The lone dissenter (Takata) wanted a 25-basis-point hike.
  • The Bank of England and the ECB will be out with rate decisions later this morning. Both are expected to leave their key policy rates unchanged.
  • The Swiss National Bank kept its key policy rate unchanged at 0.00%, as expected.
  • Sweden's Riksbank said its repo rate is not likely to change for some time.
• Commodities:
  • WTI Crude: +1.3% to $97.58/bbl
  • Gold: -4.2% to $4690.40/ozt
  • Copper: -2.9% to $5.43/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1470
  • GBP/USD: +0.2% to 1.3277
  • USD/CNH: flat at 6.9003
  • USD/JPY: -0.5% to 159.08
• The Day Ahead:
  • 08:30 ET: Weekly Initial (Briefing.com consensus: 215K; prior 213K) and Continuing Jobless Claims (prior 1850K)
  • 08:30 ET: March Philadelphia Fed Index (Briefing.com consensus: 4.7; prior 16.3)
  • 10:00 ET: January New Home Sales (Briefing.com consensus: 719K; prior 745K)
  • 10:00 ET: January Wholesale Inventories (Briefing.com consensus: 0.2%; prior 0.2%)
  • 10:30 ET: EIA Natural Gas Inventories (prior -38 bcf)