Bond Market Update

Lifted by Iran Ceasefire

• U.S. Treasuries are on track for a sharply higher start in all tenors that should send yields back to last week's lows. Treasury futures have enjoyed a rally alongside equity futures after President Trump agreed to a two-week ceasefire with Iran. The news prompted a sharp drop in energy prices with WTI crude falling nearly $20/bbl toward $95/bbl. The extension of the negotiating window with Iran fueled a significant improvement in risk tolerance while economic data has not gotten in the way of the improved sentiment. Japan's cash earnings for February grew at their fastest pace since September while real cash earnings increased for the second month in a row. In Europe, Germany reported weak Factory Orders growth for February (0.9%; expected 3.0%), making for just a small rebound from a sharp drop in January (-11.1%). The U.S. session, however, will not see any top-tier data. The market will receive FOMC Minutes from the March meeting at 14:00 ET and the U.S. Treasury will follow yesterday's strong 3-yr note sale with a $39 bln 10-yr note reopening. The U.S. Dollar Index is down 1.2% at 98.69.
• Yield Check:
  • 2-yr: -10 bps to 3.73%
  • 3-yr: -11 bp to 3.75%
  • 5-yr: -12 bps to 3.86%
  • 10-yr: -10 bps to 4.24%
  • 30-yr: -7 bps to 4.85%

• News:
  • The Reserve Bank of New Zealand left its official cash rate at 2.25%, as expected, though RBNZ policymakers discussed a rate hike.
  • The Reserve Bank of India left its policy rate at 5.25%, as expected.
  • Japan's Finance Minister Katayama said that it is still uncertain if an extra budget will be needed.
  • Japan's February Average Cash Earnings rose 3.3% yr/yr (expected 2.7%; last 2.5%) and Overall Wage Income also rose 3.3% yr/yr (expected 2.7%; last 2.5%). February Current Account surplus reached JPY2.71 trln (expected surplus of JPY2.40 trln; last surplus of JPY3.13 trln). March Economy Watchers Current Index fell to 42.2 from 48.9 (expected 48.0).
  • South Korea's February Current Account surplus reached $23.19 bln (last surplus of $13.26 bln).
  • Hong Kong's March Manufacturing PMI hit 49.3 (last 53.3).
  • Eurozone's February Retail Sales were down 0.2% m/m, as expected (last 0.0%) but up 1.7% yr/yr (expected 1.6%; last 2.1%). February PPI was down 0.7% m/m (expected -0.6%: last 0.8%), falling 3.0% yr/yr, as expected (last -2.0%).
  • Germany's February Factory Orders rose 0.9% m/m (expected 3.0%; last -11.1%).
  • U.K.'s March Halifax House Price Index fell 0.5% m/m (expected 0.2%; last 0.3%), rising 0.8% yr/yr (expected 1.5%; last 1.2%). 
  • France's February trade deficit reached EUR5.8 bln (expected deficit of EUR2.4 bln; last deficit of EUR2.0 bln).
  • Swiss March Unemployment Rate remained at 3.0%, as expected.
• Commodities: 
  • WTI Crude: -17.5% to $93.29/bbl
  • Gold: +3.0% to $4824.60/ozt
  • Copper: +3.3% to $5.746/lb
• Currencies:
  • EUR/USD: +0.9% to 1.1699
  • GBP/USD: +1.3% to 1.3467
  • USD/CNH: -0.4% to 6.8253
  • USD/JPY: -0.8% to 158.24
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -0.8%; prior -10.4%)
  • 10:30 ET: Weekly crude oil inventories (prior +5.45 mln)
  • 14:00 ET: March FOMC Minutes
• Treasury Auctions:
  • 13:00 ET: $39 bln 10-yr Treasury note reopening results