Bond Market Update

Recent Gains Narrowed

• U.S. Treasuries dipped on Wednesday, giving back the bulk of their Tuesday gains in an otherwise quiet midweek session. Treasuries followed their upbeat start to the week with a modestly lower open across the complex, adding to their losses in mid-morning trade. There was no meaningful change to the market's guarded optimism that the Iran conflict will end soon while crude oil briefly fell below $90/bbl before recovering its loss. Economic data released today had no meaningful impact on price action, but that was not a surprise given the nature of today's reports. Import and export prices increased notably in March while the April Empire State Manufacturing survey (11.0; prior -0.2) showed renewed manufacturing growth in the NY Fed District. Later in the day, the Fed released its April Beige Book, though that release was also met with little fanfare. The Beige Book noted that overall economic activity since the last report grew at a slight to modest pace in eight Districts. Manufacturing activity rose in most Districts while banking sector activity was steady. Consumer spending grew slightly, though many Districts reported signs of financial strain among consumers. Employment was steady in most Districts while prices grew moderately. Treasuries inched up off their lows in midday trade, resulting in a finish just below the day's opening levels. Crude oil stayed just below $91.50/bbl while the U.S. Dollar Index dipped 0.1% to 98.05.
• Yield Check:
  • 2-yr: +2 bps to 3.77%
  • 3-yr: +2 bps to 3.78%
  • 5-yr: +3 bps to 3.90%
  • 10-yr: +3 bps to 4.28%
  • 30-yr: +2 bps to 4.89%

• News:
  • Treasury Secretary Bessent said that growth in 2026 could easily exceed 3.0% and that tariffs could be restored to their prior levels by July. He also said that gas prices should decrease significantly in time for summer.
  • China's President Xi met with Russia's Foreign Minister Lavrov.
  • China's Foreign Ministry vowed to implement countermeasures if the U.S. raises tariffs on China due to the conflict with Iran.
  • IPO proceeds in China were up 60% yr/yr in Q1, according to Shanghai Securities News.
  • New Zealand's Prime Minister Luxon said that the country's refined fuel supplies for May are secure.
  • European Central Bank President Lagarde repeated that the ECB is in a good position to respond to the Iran conflict, but also said it is too early to determine the full impact of the energy price shock.
  • Japan's April Reuters Tankan Index fell to 7 from 18. February Core Machinery Orders rose 13.6% m/m (expected -1.1%; last -5.5%), jumping 24.7% yr/yr (expected 8.5%; last 13.7%).
  • South Korea's March Unemployment Rate fell to 2.7% from 2.9%. March trade surplus reached $26.24 bln (expected $25.74 bln; last $15.38 bln) as imports grew 13.2% yr/yr, as expected (last 7.5%), and exports jumped 49.2% yr/yr (expected 48.3%; last 28.7%). March Import Price Index was up 18.4% yr/yr (last 1.6%) and Export Price Index was up 28.7% yr/yr (last 11.1%).
  • India's March WPI Inflation was up 3.88% yr/yr (expected 3.00%; last 2.13%). March trade deficit reached $20.67 bln (expected deficit of $32.75 bln; last deficit of $27.10 bln).
  • Eurozone's February Industrial Production was up 0.4% m/m (expected 0.3%; last -0.8%) but down 0.6% yr/yr (expected -1.0%; last -0.6%).
  • France's March CPI was up 1.0% m/m (expected 0.9%; last 0.6%), rising 1.7% yr/yr, as expected (last 0.9%).
• Today's Data:
  • The Empire State Manufacturing survey rose to 11.0 (Briefing.com consensus 0.0) in April from -0.2 in March.
  • The weekly MBA Mortgage Index rose 1.8% after falling 0.8% a week ago. The Purchase Index was down 1.0% while the Refinance Index rose 5.1%.
  • Import prices were up 0.8% in March after increasing a revised 0.9% (from 1.3%) in February. Excluding oil, import prices were up 0.6% after increasing a revised 0.8% (from 1.1%) in February. Export prices were up 1.6% in March after increasing a revised 1.9% (from 1.5%) in February. Excluding agriculture, export prices were up 1.7% after increasing a revised 2.1% (from 1.7%) in February. 
  • The NAHB Housing Market Index fell to 34 in April (Briefing.com consensus 38) from 38 in March.
  • Weekly crude oil inventories decreased by 913,000 barrels after increasing by 3.08 million barrels a week ago.
• Commodities:
  • WTI crude: UNCH at $91.30/bbl
  • Gold: -0.6% to $4823.60/ozt
  • Copper: UNCH at $6.08/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1804
  • GBP/USD: +0.1% to 1.3576
  • USD/CNH: +0.1% to 6.8161
  • USD/JPY: +0.1% to 158.96
• The Day Ahead:
  • 8:30 ET: April Philadelphia Fed survey (Briefing.com consensus 12.7; prior 18.1), weekly Initial Claims (Briefing.com consensus 215,000; prior 219,000), and Continuing Claims (prior 1.794 mln)
  • 9:15 ET: March Industrial Production (Briefing.com consensus 0.1%; prior 0.2%) and Capacity Utilization (Briefing.com consensus 76.4%; prior 76.3%)
  • 10:30 ET: Weekly natural gas inventories (prior +50 bcf)