Bond Market Update

Rebound Continues

• U.S. Treasuries are on track for a higher start in all tenors, looking to continue their rebound of March lows. Treasury futures began climbing in early evening trade, continuing their advance until the start of the European session, when some selling pressure knocked futures down from highs. The advance has coincided with solid gains in other sovereign debt and big gains in global equity markets. The gains follow President Trump's comments that U.S. forces could end their mission in Iran in the coming weeks. Crude oil has added to yesterday's loss, though it is still just below the $100/bbl mark. Economic data released overnight showed mostly expansionary March Manufacturing PMI readings despite the surging energy prices. However, there is still some concern about the delayed impact of the recent spike in oil. The U.S. Dollar Index is down 0.5% at 99.46, deepening yesterday's reversal from its highest level since May.
• Yield Check:
  • 2-yr: -4 bps to 3.76%
  • 3-yr: -4 bps to 3.78%
  • 5-yr: -4 bps to 3.91%
  • 10-yr: -3 bps to 4.28%
  • 30-yr: -1 bp to 4.88%

• News:
  • The Bank of Japan will reduce its bond purchases by about 8% in Q2, which was expected.
  • South Korean officials said that there will be no disruptions to the supply of helium and ethylene gas through the first half of the year.
  • European Central Bank policymaker Rehn said that the latest inflation reading was not a surprise and that a rate hike should not be seen as certain.
  • Germany's economy minister urged a return to nuclear power.
  • China's March RatingDog Manufacturing PMI hit 50.8 (expected 51.6; last 52.1).
  • Japan's March Manufacturing PMI hit 51.6, as expected (last 51.4). Q1 Tankan Large Manufacturers Index rose to 17 from 16 (expected 16) and Large Non-Manufacturers Index rose to 36 from 34 (expected 33). Q1 All Big Industry Capex increased 3.3% (last 12.6%) and All Small Industry Capex decreased 8.1% (last 0.1%).
  • South Korea's flash March trade surplus reached $25.74 bln (expected surplus of $21.20 bln; last surplus of $15.38 bln) as imports grew 13.2% yr/yr (expected 18.0%; last 7.5%) and exports jumped 48.3% yr/yr (expected 44.9%; last 28.7%). March Manufacturing PMI hit 52.6 (last 51.1).
  • Hong Kong's February Retail Sales jumped 19.3% yr/yr (last 5.5%).
  • Singapore's Q1 URA Property Index was up 0.3% qtr/qtr (last 0.6%).
  • Australia's March Manufacturing PMI hit 49.8 (expected 50.1; last 51.0). Flash February Building Approvals rose 29.7% m/m (expected 5.8%; last -7.2%), increasing 14.0% yr/yr (last -15.7%). February Private House Approvals were up 0.2% m/m (last 1.7%).
  • New Zealand's February Building Consents rose 2.7% m/m (last 2.0%).
  • Eurozone's March Manufacturing PMI hit 51.6 (expected 51.4; last 50.8) and February Unemployment Rate rose to 6.2% from 6.1% (expected 6.1%).
  • Germany's March Manufacturing PMI hit 52.2 (expected 51.7; last 50.9).
  • U.K.'s March Manufacturing PMI hit 51.0 (expected 51.4; last 51.7).
  • Italy's March Manufacturing PMI hit 51.3 (expected 50.9; last 50.6). February Unemployment Rate rose to 5.3% from 5.2% (expected 5.2%).
  • France's March Manufacturing PMI hit 50.0 (expected 50.2; last 50.2).
  • Spain's March Manufacturing PMI hit 48.7 (expected 50.5; last 50.0).
  • Swiss February Retail Sales rose 0.9% yr/yr (expected 1.5%; last -0.6%). March Manufacturing PMI hit 53.3 (expected 50.5; last 50.0).
• Commodities:
  • WTI Crude: -2.8% to $98.56/bbl
  • Gold: +2.3% to $4786.50/ozt
  • Copper: UNCH at $5.616/lb
• Currencies:
  • EUR/USD: +0.5% to 1.1608
  • GBP/USD: +0.8% to 1.3322
  • USD/CNH: -0.2% to 6.8742
  • USD/JPY: -0.2% to 158.34
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -10.4%; prior -10.5%)
  • 8:15 ET: March ADP Employment Change (Briefing.com consensus 42,000; prior 63,000) 
  • 8:30 ET: February Retail Sales (Briefing.com consensus 0.5%; prior -0.2%) and Retail Sales ex-auto (Briefing.com consensus 0.3%; prior 0.0%)
  • 9:45 ET: Final March S&P Global U.S. Manufacturing PMI (prior 52.4)
  • 10:00 ET: March ISM Manufacturing (Briefing.com consensus 52.3%; prior 52.4%)
  • 10:30 ET: Weekly crude oil inventories (prior +6.93 mln)