Bond Market Update

Quiet Start Ahead

• U.S. Treasuries are on track for a slightly lower start in shorter tenors after a quiet night in the futures market. Treasury futures slipped out of the gate on Sunday evening after President Trump stopped his negotiators from going to Pakistan due to a belief that the meeting would be a waste of time. However, he said that negotiations will continue, and a bit later, Iran presented a proposal to restore traffic through the Strait of Hormuz. It is unclear if the U.S. will accept the offer but the presence of dialogue is seen as encouraging. Treasury futures reached their lows at the start of the overnight session, spending the rest of the night in a steady rise that helped them erase their early losses. Expectations for rate hikes from the European Central Bank and the Bank of England are on the rise due to elevated energy prices while the Bank of Japan will release its latest policy statement overnight, but a rate hike is not expected just yet. Crude oil is back above $95/bbl while the U.S. Dollar Index is down 0.2% at 98.32.
• Yield Check:
  • 2-yr: +1 bp to 3.79%
  • 3-yr: +1 bp to 3.81%
  • 5-yr: +1 bp to 3.93%
  • 10-yr: UNCH at 4.31%
  • 30-yr: UNCH at 4.92%

• News:
  • Japan's Prime Minister Takaichi said that Japan has secured a stable supply of oil into next year.
  • South China Morning Post reported that the Chinese government has developed a cheaper all-iron battery for renewable energy storage.
  • Banks in the U.K. are preparing for higher taxes if Prime Minister Starmer is replaced by someone leaning farther to the left.
  • Standard & Poor's reaffirmed Greece's BBB rating with a Stable outlook while Germany's AAA rating was also affirmed.
  • China's March Industrial Profit was up 15.5% YTD (last 15.2%).
  • Japan's February Leading Index rose to 113.3 from 112.0 (expected 112.4) and Coincident Indicator was down 1.8% m/m (expected -1.6%; last 3.4%).
  • Singapore's March Industrial Production rose 4.7% m/m (last -1.2%), increasing 10.1% yr/yr (last 3.3%).
  • Germany's May GfK Consumer Climate fell to -33.3 from -28.1 (expected -30.2).
  • U.K.'s April CBI Distributive Trades Survey fell to -68 from -52 (expected -42).
• Commodities:
  • WTI Crude: +0.7% to $95.09/bbl
  • Gold: -0.5% to $4719.60/ozt
  • Copper: -0.1% to $6.023/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1740
  • GBP/USD: +0.2% to 1.3557
  • USD/CNH: -0.1% to 6.8234
  • USD/JPY: -0.1% to 159.19
• Treasury Auctions: 
  • 11:30 ET: $69 bln 2-yr Treasury note auction results
  • 13:00 ET: $70 bln 5-yr Treasury note auction results