Bond Market Update

New Concerns Taken in Stride

• U.S. Treasuries began the week on a slightly lower note with the market showing limited concern over a weekend speedbump on the path to a peace deal with Iran. Last week ended in optimistic fashion with the market growing more certain that the conflict will end soon, but the weekend brought reports of continued shipping difficulties through the Strait of Hormuz. Still, U.S. negotiators traveled to Pakistan today, where they expect to meet representatives from Iran for another round of talks. While the weekend developments were disappointing, the market held up very well with Treasuries spending the day in a sideways range while equities gave back just a small portion of their big gains from last week. Likewise, crude oil climbed, pausing just below $90/bbl. Meanwhile, Treasuries hovered just below their opening levels into the afternoon, rising above their starting marks in late trade. The U.S. Dollar Index fell to its lowest level since late February before returning to its flat line at 98.10.
• Yield Check:
  • 2-yr: +2 bps to 3.72%
  • 3-yr: +1 bp to 3.73%
  • 5-yr: +1 bp to 3.85%
  • 10-yr: UNCH at 4.25%
  • 30-yr: UNCH at 4.88%

• News:
  • The People's Bank of China left its one-year and five-year loan prime rates at their respective 3.00% and 3.50%.
  • The approval rating of Japan Prime Minister Takaichi's cabinet fell to 66% from 71%.
  • The Senate Banking Committee will consider Kevin Warsh's Fed chairman nomination on Wednesday.
  • European Central Bank policymaker Demarco said that the central bank should wait a bit longer before raising rates, adding that bets on two rate hikes are not unreasonable.
  • Moody's lowered Belgium's rating to A1 from Aa3, revising the outlook to Stable from Negative.
  • DBRS reaffirmed Italy's A rating with a Stable trend.
  • Japan's February Tertiary Industry Activity Index rose to -0.7 from -8.7.
  • New Zealand's March trade surplus reached NZD698 mln (expected surplus of NZD175 mln; last deficit of NZD365 mln).
  • Eurozone's February Construction Output was down 1.9% m/m (last -1.33%).
  • Germany's March PPI was up 2.5% m/m (expected 1.4%; last -0.5%) but down 0.2% yr/yr (last -3.3%).
• Commodities:
  • WTI crude: +6.2% to $89.40/bbl
  • Gold: -1.0% to $4830.10/ozt
  • Copper: -1.2% to $6.04/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1786
  • GBP/USD: +0.2% to 1.3538
  • USD/CNH: UNCH at 6.8146
  • USD/JPY: +0.2% to 158.83
• The Day Ahead:
  • 8:30 ET: March Retail Sales (Briefing.com consensus 1.3%; prior 0.6%) and Retail Sales ex-auto (Briefing.com consensus 0.9%; prior 0.5%)
  • 10:00 ET: February Business Inventories (Briefing.com consensus 0.1%; prior -0.1%) and March Pending Home Sales (Briefing.com consensus 0.5%; prior 1.8%)