Bond Market Update

 Quiet Start Ahead

• U.S. Treasuries are on track to begin near their flat lines after two days of heavy selling that drove yields to their highest closing levels in almost a year. Treasury futures spent the night in a razor-thin range with some light buying seen ahead of the start of the European session. Crude oil has also held its ground, which surely contributed to the limited movement in Treasuries. President Trump is on his way to China with a team of corporate executives. He is scheduled to meet with China's leader on Thursday morning local time, so headlines pertaining to the meeting will not start trickling out until late this evening. Economic data released overnight had little impact on overall action while the U.S. session will feature the release of April PPI (Briefing.com consensus 0.4%; prior 0.5%) and Core PPI (Briefing.com consensus 0.3%; prior 0.1%) at 8:30 ET. Later in the day, the U.S. Treasury will complete this week's note and bond auction slate with a sale of $25 bln in 30-yr bonds. Crude oil hovers near $102/bbl while the U.S. Dollar Index is up 0.2% at 98.46.
• Yield Check:
  • 2-yr: -1 bp to 3.99%
  • 3-yr: -1 bp to 4.02%
  • 5-yr: UNCH at 4.12%
  • 10-yr: +1 bp to 4.47%
  • 30-yr: UNCH at 5.03%

• News:
  • The International Energy Agency warned in a report that the global oil supply will fall below demand this year due to the Iran conflict. The agency also lowered global demand and supply forecasts for the year.
  • South Korea's cabinet is holding an emergency meeting as Samsung Electronics workers threaten an 18-day strike, starting next Thursday if their compensation demands are not met.
  • Australia is cutting taxes for all taxpayers and implementing long-term reforms in its budget for 2026.
  • South Korea's KDI raised its domestic 2026 growth forecast to 2.5% from 1.9% while the inflation outlook was increased to 2.7% from 2.1%.
  • Reports from the U.K. indicate that worker unions are now joining the call for the resignation of Prime Minister Starmer after his party was dealt a humiliating defeat in local elections.
  • Japan's March adjusted Current Account surplus reached JPY3.90 trln (expected JPY2.95 trln; last JPY2.70 trln). April Bank Lending was up 5.4% yr/yr (expected 4.6%; last 4.8%) and April Economy Watchers Current Index fell to 40.8 from 42.2 (expected 41.5).
  • South Korea's April Unemployment Rate rose to 2.8% from 2.7%.
  • Australia's Q1 Wage Price Index was up 0.8% qtr/qtr, as expected (last 0.8%), rising 3.3% yr/yr, as expected (last 3.4%). Q1 Home Loans fell 4.3% qtr/qtr (last 9.4%).
  • New Zealand's Q2 Inflation Expectations accelerated to 2.5% qtr/qtr from 2.4%.
  • Eurozone's flash Q1 GDP expanded 0.1% qtr/qtr, as expected (last 0.2%), growing 0.8% yr/yr, as expected (last 1.2%). Q1 Employment Change ticked up 0.1% qtr/qtr (expected 0.0%; last 0.2%), rising 0.5% yr/yr (last 0.7%). March Industrial Production was down 2.1% yr/yr (expected -1.7%; last -0.8%).
  • Germany's April WPI was up 2.0% m/m (expected 1.7%; last 2.7%), rising 6.3% yr/yr (last 4.1%).
  • France's Q1 Unemployment Rate rose to 8.1% from 7.9% (expected 7.8%). April CPI was up 1.0% m/m, as expected (last 1.0%), rising 2.2% yr/yr, as expected (last 1.7%).
• Commodities:
  • WTI Crude: -0.4% to $101.79/bbl
  • Gold: +0.6% to $4712.50/ozt
  • Copper: +2.0% to $6.658/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1713
  • GBP/USD: -0.2% to 1.3505
  • USD/CNH: UNCH at 6.7882
  • USD/JPY: +0.1% to 157.76
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 1.7%; prior -4.4%)
  • 8:30 ET: April PPI (Briefing.com consensus 0.4%; prior 0.5%) and Core PPI (Briefing.com consensus 0.3%; prior 0.1%)
  • 10:30 ET: Weekly crude oil inventories (prior -2.31 mln)
• Treasury Auctions:
  • 13:00 ET: $25 bln 30-yr Treasury bond auction results