Bond Market Update

March Starts With Sharp Slide

• U.S. Treasuries began March with a sharp retreat that lifted yields off their lowest levels of the year. The belly was at the forefront of the Monday retreat, but the entire complex started the cash session on a firmly lower note after the weekend featured the start of a military campaign against Iran. The weekend strikes decapitated Iran's regime, but President Trump said that the war could continue for a few weeks, so the market will have to contend with elevated uncertainty surrounding major shipping routes. Treasuries followed their lower start with a brief bounce attempt near Thursday's closing levels, but continued pressure drove action to levels seen at the start of last week. Crude oil rallied past $71/bbl but finished below its overnight high of $75/bbl, while the U.S. Dollar Index rose 0.8% to 98.39, rallying past its 50-day moving average (97.90) to its 200-day moving average (98.35).
• Yield Check:
  • 2-yr: +11 bps to 3.49%
  • 3-yr: +11 bps to 3.49%
  • 5-yr: +11 bps to 3.62%
  • 10-yr: +9 bps to 4.05%
  • 30-yr: +7 bps to 4.70%

• News:
  • The Atlanta Fed's GDPNow forecast for Q1 GDP was left at 3.0% in the latest estimate.
  • OPEC+ agreed to increase its output in April, in line with speculation from late last week.
  • Bank of Japan Deputy Governor Himino said that rate hikes will continue, but he did not specify the planned timing of the next increase.
  • China's January FDI was down 5.7% YTD (last -9.5%).
  • Japan's February Manufacturing PMI hit 53.0 (expected 52.8; last 51.5)
  • South Korea's February trade surplus reached $15.51 bln (expected surplus of $10.00 bln; last surplus of $8.72 bln) as imports grew 7.5% yr/yr (expected 13.0%; last 11.6%) and exports jumped 29.0% yr/yr (expected 24.0%; last 33.8%).
  • Australia's February Manufacturing PMI hit 51.0 (expected 51.5; last 52.3). February MI Inflation Gauge was down 0.2% m/m (last 0.2%), and February Commodity Prices rose 2.7% yr/yr (last 2.7%). Q4 Company Gross Operating Profits were up 5.8% qtr/qtr (expected 1.8%; last 1.5%) and Q4 Company Pre-tax profits were up 1.6% qtr/qtr (last 0.4%).
  • India's February Manufacturing PMI hit 56.9 (expected 57.5; last 55.4). January Industrial Production was up 4.8% yr/yr (expected 6.5%; last 7.8%) and January Manufacturing Output was also up 4.8% (last 8.1%).
  • Eurozone's February Manufacturing PMI hit 50.8, as expected (last 49.5).
  • Germany's January Retail Sales fell 0.9% m/m (expected 0.0%; last 1.2%) but were up 1.2% yr/yr (last 4.3%). February Manufacturing PMI hit 50.9 (expected 50.7; last 49.1).
  • U.K.'s February Nationwide HPI was up 0.3% m/m (expected 0.2%; last 0.3%), rising 1.0% yr/yr (expected 0.7%; last 1.0%). February Manufacturing PMI hit 51.7 (expected 52.0; last 52.0). January Mortgage Approvals reached 60,000 (expected 62,000; last 61,010) and January Net Lending to Individuals reached GBP5.90 bln (expected GBP6.20 bln; last GBP6.10 bln).
  • France's February Manufacturing PMI hit 50.1 (expected 49.9; last 51.2).
  • Italy's February Manufacturing PMI hit 50.6 (expected 49.1; last 48.1).
  • Spain's February Manufacturing PMI hit 50.0 (expected 49.9; last 49.2).
  • Swiss January Retail Sales were down 1.1% yr/yr (expected 2.7%; last 2.8%) and February Manufacturing PMI hit 47.4 (expected 49.8; last 48.8).
• Today's Data:
  • The ISM Manufacturing Index checked in at 52.4% for February (Briefing.com consensus: 52.1%), down from 52.6% in January. The dividing line between expansion and contraction is 50.0%, so the February figure suggests manufacturing activity in February expanded but at a slower pace than the prior month.
    • The key takeaway from the report is the faster pace of growth in the Prices Index, as that will fuel concerns about sticky inflation pressure (and the Fed sticking with its current policy rate for longer).
  • The S&P Global U.S. Manufacturing PMI hit 51.6 in the final reading for February, up from 51.2 in the preliminary reading, but down from the final January reading of 52.4.
• Commodities:
  • WTI crude: +6.2% to $71.23/bbl
  • Gold: +1.2% to $5311.00/ozt
  • Copper: -1.8% to $5.95/lb
• Currencies:
  • EUR/USD: -0.9% to 1.1708
  • GBP/USD: -0.4% to 1.3424
  • USD/CNH: +0.5% to 6.8928
  • USD/JPY: +0.7% to 157.15
• No Data on Tomorrow's Schedule