Bond Market Update

Bounce in Progress

• U.S. Treasuries are on track for a higher start after three days of losses in most tenors. Treasury futures held their ground during the Asian session, rising steadily after the focus turned to action in Europe. The end of the month brought an overnight barrage of economic data. April Manufacturing PMI readings from China showed an ongoing expansion at a slow pace while Non-Manufacturing PMI (49.4) dipped below 50.0, signaling a contraction in the services sector. In Europe, flash Q1 GDP readings from Germany, Italy, and Spain beat expectations while France lagged, reporting no growth. The market also learned that the Bank of England held its bank rate at 3.75% in an 8-1 vote while the European Central Bank is also expected to hold its policy steady when it releases its statement at 8:15 ET. Crude oil briefly climbed above $110/bbl in overnight action before reversing while the U.S. Dollar Index is down 0.7% at 98.27, falling back below its 200-day moving average (98.54) as the dollar falls more than 2.5% against the Japanese yen after a very strong 2-yr JBG auction overnight.
• Yield Check:
  • 2-yr: -4 bps to 3.89%
  • 3-yr: -3 bps to 3.92%
  • 5-yr: -4 bps to 4.03%
  • 10-yr: -2 bps to 4.40%
  • 30-yr: -1 bp to 4.98%

• News:
  • Standard & Poor's affirmed South Korea's AA rating with a Stable outlook.
  • China's April Manufacturing PMI hit 50.3 (expected 50.1; last 50.4) and Non-Manufacturing PMI hit 49.4 (expected 49.9; last 50.1). April RatingDog Manufacturing PMI hit 52.2 (expected 50.9; last 50.8).
  • Japan's March Industrial Production was down 0.5% m/m (expected 1.0%; last -2.0%) and March Retail Sales rose 1.7% yr/yr (expected 0.9%; last -0.1%). April Household Confidence fell to 32.2 from 33.3 (expected 32.8), March Housing Starts were down 29.3% yr/yr (expected -28.7%; last -4.9%), and Construction Orders fell 14.4% yr/yr (last 42.7%).
  • South Korea's March Retail Sales rose 1.8% m/m (last -0.3%), March Industrial Production increased 3.6% yr/yr (expected 3.8%; last -2.3%), and March Service Sector Output was up 1.4% m/m (last 0.3%).
  • Singapore's Q1 Unemployment Rate rose to 2.1% from 2.0% and March Bank Lending reached SGD902.3 bln (last SGD893.6 bln). Q1 Business Expectations rose to 17.0 from 11.0.
  • Australia's March Housing Credit rose 0.6% m/m (last 0.6%), and Private Sector Credit rose 0.7% m/m (expected 0.6%; last 0.6%). Q1 Import Price Index was up 0.1% qtr/qtr (expected 0.4%; last 0.9%) and Export Price Index was up 0.5% qtr/qtr (last 3.2%).
  • New Zealand's April ANZ Business Confidence fell to -10.6 from 32.5.
  • Eurozone's Q1 GDP expanded 0.1% qtr/qtr (expected 0.2%; last 0.2%), growing 0.8% yr/yr (expected 0.9%; last 1.2%). Flash April CPI was up 1.0% m/m (last 1.3%), rising 3.0% yr/yr, as expected (last 2.6%). Flash April Core CPI was up 2.2% yr/yr, as expected (last 2.3%).
  • Germany's Q1 GDP expanded 0.3% qtr/qtr (expected 0.1%; las 0.3%), growing 0.3% yr/yr, as expected (last 0.4%). March Retail Sales were down 2.0% m/m (expected -0.3%; last -0.3%), falling 2.0% yr/yr (expected 0.5%; last 0.9%). March Import Price Index was up 3.6% m/m, as expected (last 0.3%), rising 2.3% yr/yr (expected 1.6%; last -2.3%). April Unemployment increased by 20,000 (expected 4,000; last 3,000), and Unemployment Rate remained at 6.4% (expected 6.3%).
  • France's Q1 GDP was unchanged qtr/qtr (expected 0.2%; last 0.2%), rising 1.1% yr/yr (last 1.3%). Flash April CPI was up 1.0% m/m (expected 0.9%; last 1.0%), rising 2.2% yr/yr (expected 2.0%; last 1.7%). March PPI was up 2.0% m/m (last -0.3%), rising 0.2% yr/yr (last -2.4%). March Consumer Spending was up 0.7% m/m, as expected (last -1.4%).
  • Italy's Q1 GDP expanded 0.2% qtr/qtr (expected 0.1%; last 0.3%), growing 0.7% yr/yr (expected 0.6%; last 0.8%). March Unemployment Rate fell to 5.2% from 5.4% (expected 5.3%). Flash April CPI was up 1.2% m/m (expected 0.9%; last 0.5%), rising 2.8% yr/yr (expected 2.6%; last 1.7%).
  • Spain's Q1 GDP expanded 0.6% qtr/qtr (expected 0.5%; last 0.8%), growing 2.7% yr/yr, as expected (last 2.7%). March Consumer Confidence fell to 66.9 from 83.9. February Current Account surplus reached EUR4.04 bln (last surplus of EUR2.73 bln).
• Commodities:
  • WTI Crude: -2.7% to $103.96/bbl
  • Gold: +1.9% to $4647.50/ozt
  • Copper: +1.0% to $5.99/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1704
  • GBP/USD: +0.3% to 1.3516
  • USD/CNH: -0.2% to 6.8325
  • USD/JPY: -2.4% to 156.43
• Data out Today:
  • 8:30 ET: 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)
  • 9:45 ET: April Chicago PMI (Briefing.com consensus 52.4; prior 52.8)
  • 10:30 ET: Weekly natural gas inventories (prior +103 bcf)