Bond Market Update

Short End Trims Recent Losses

• U.S. Treasuries finished a down week on a mostly higher note with shorter tenors pacing a Friday bounce that pressured yields from their highest levels in over two weeks. The trading day started on a slightly higher note with longer tenors showing early strength, but the entire complex faced some early selling that briefly drove yields toward yesterday's highs. However, that initial bout of weakness was reversed quickly, returning 10s and 30s to their flat lines, where they remained into the afternoon, while shorter tenors reached their best levels in the early afternoon, holding onto their gains until the close. The market remained on the lookout for reports related to U.S.-Iran negotiations that will likely take place over the weekend but today did not see as many conflicting reports as yesterday. The New York Times reported in the afternoon that Iranian officials are looking to restart negotiations despite projecting a tough stance. There was some relief in the price of oil, which dipped back below $95/bbl, though WTI crude still gained nearly $10/bbl for the week. The U.S. Dollar Index fell 0.2% to 98.54, narrowing this week's gain to 0.3%.
• Yield Check:
  • 2-yr: -5 bps to 3.78% (+8 bps this week)
  • 3-yr: -4 bps to 3.80% (+8 bps this week)
  • 5-yr: -3 bps to 3.92% (+8 bps this week)
  • 10-yr: -1 bp to 4.31% (+6 bps this week)
  • 30-yr: UNCH at 4.92% (+3 bps this week)

• News:
  • The Department of Justice will drop its criminal probe into renovation costs of Federal Reserve headquarters.
  • Bangko Sentral ng Pilipinas raised its policy rate by 25 basis points to 4.50%, making for the first hike in two years.
  • Japan's Chief Cabinet secretary repeated that there is no need for a supplementary budget at this time.
  • China is expected to increase its grain harvest forecast for 2026 with stable prices.
  • Bank of England policymaker Breeden said that equity markets are too high and are set to fall.
  • China's March FDI was down 7.3% YTD (last -5.7%).
  • Japan's March National CPI was up 0.4% m/m, rising 1.5% yr/yr (last 1.3%). March National Core CPI was up 1.8% yr/yr (expected 1.7%; last 1.6%). March Corporate Services Price Index was up 3.1% yr/yr (expected 3.0%; last 2.7%).
  • Singapore's Q1 URA Property Index was up 0.9% qtr/qtr (expected 0.3%; last 0.6%).
  • Germany's April ifo Business Climate Index fell to 84.4 from 86.3 (expected 85.7). April Current Assessment fell to 85.4 from 86.7 (expected 86.2) and Business Expectations fell to 83.3 from 85.9 (expected 85.0).
  • U.K.'s March Retail Sales rose 0.7% m/m (expected 0.0%; last -0.6%), increasing 1.7% yr/yr (expected 1.3%; last 1.8%). March Core Retail Sales were up 0.2% m/m, as expected (last -0.6%), rising 1.7% yr/yr (expected 2.0%; last 2.7%).
  • France's April Consumer Confidence fell to 84 from 89 (expected 88).
  • Spain's March PPI was up 3.4% yr/yr (last -6.9%).
• Today's Data:
  • The final reading for the University of Michigan Consumer Sentiment Index for April edged up to 49.8 (Briefing.com consensus: 47.6) from the preliminary (and record low) reading of 47.6. The final reading for March was 53.3. In the same period a year ago, the index stood at 52.2.
    • The key takeaway from the report is that there was some slight improvement from the preliminary report as gas prices eased a bit following the ceasefire, yet gas prices are still much higher than where they were before the war began, which is contributing to the stark reality that consumer sentiment is near the trough seen in June 2022.
• Commodities:
  • WTI crude: -1.4% to $94.42/bbl 
  • Gold: +0.4% to $4739.80/ozt
  • Copper: -0.8% to $6.03/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1719
  • GBP/USD: +0.5% to 1.3530
  • USD/CNH: UNCH at 6.8340
  • USD/JPY: -0.1% to 159.44
• The Week Ahead:
  • Monday: $69 bln 2-yr Treasury note auction results at 11:30 ET and $70 bln 5-yr Treasury note auction results at 13:00 ET
  • Tuesday: February FHFA Housing Price Index (Briefing.com consensus 0.2%; prior 0.1%) and February S&P Case-Shiller Home Price Index (Briefing.com consensus 1.2%; prior 1.2%), April Consumer Confidence (Briefing.com consensus 89.2; prior 91.8) at 10:00 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior 7.9%) at 7:00 ET; February and March Housing Starts (prior 1.487 mln) and Building Permits (prior 1.376 mln), March Durable Orders (prior -1.4%), Durable Orders ex-transport (prior 0.8%), March advance International Trade in Goods (prior NA), March advance Retail Inventories (prior NA), and March advance Wholesale Inventories (prior NA) at 8:30 ET; February and March New Home Sales (prior 587,000) at 10:00 ET; weekly crude oil inventories (prior +1.93 mln) at 10:30 ET; and April FOMC Decision (Briefing.com consensus 3.50-3.75%; prior 3.50-3.75%)
  • Thursday: Advance Q1 GDP (Briefing.com consensus 2.1%; prior 0.5%), advance Q1 GDP Deflator (Briefing.com consensus 3.3%; prior 3.7%), March Personal Income (Briefing.com consensus 0.4%; prior -0.1%), Personal Spending (Briefing.com consensus 0.4%; prior 0.5%), PCE Prices (Briefing.com consensus 0.6%; prior 0.4%), Core PCE Prices (Briefing.com consensus 0.3%; prior 0.4%), Q1 Employment Cost Index (Briefing.com consensus 0.8%; prior 0.7%), weekly Initial Claims (Briefing.com consensus 217,000; prior 214,000), and Continuing Claims (prior 1.821 mln) at 8:30 ET; April Chicago PMI (Briefing.com consensus 52.4; prior 52.8) at 9:45 ET; and weekly natural gas inventories (prior +103 bcf) at 10:30 ET
  • Friday: Final April S&P Global U.S. Manufacturing PMI (prior 54.0) at 9:45 ET; March Construction Spending (prior NA) and April ISM Manufacturing Index (Briefing.com consensus 53.1%; prior 52.7%) at 10:00 ET