Bond Market Update

Recent Losses Narrowed

• U.S. Treasuries climbed on Wednesday, bouncing from a slide that lifted yields to fresh 2026 highs earlier this week. The trading day started in positive territory with leadership from the front end after an overnight dip in the price of oil. Oil continued sliding as the day went on, giving the market an intraday continuation of the opening boost. Comments from President Trump played a part in oil's drop, after the president repeated that he expects a quick conclusion to the Iran conflict, adding that talks are in final stages. Treasuries added to their early gains in the late morning, spending the remainder of the session in a sideways range near highs from Monday. The market held its ground through today's $16 bln 20-yr bond auction, which met good demand, while the April FOMC Minutes showed some division among policymakers about the future rate path, which was not a surprise. Crude oil finished the day just below its 50-day moving average (98.36) while the U.S. Dollar Index fell 0.2% to 99.09.
• Yield Check:
  • 2-yr: -8 bps to 4.04%
  • 3-yr: -10 bps to 4.11%
  • 5-yr: -11 bps to 4.23%
  • 10-yr: -10 bps to 4.57%
  • 30-yr: -7 bps to 5.12%

• News:
  • Samsung Electronics struck a last-minute deal with its employee union to avoid a strike.
  • Philadelphia Fed President (FOMC voter) Paulson said that a rate hike should be considered.
  • Samsung's union will launch a strike on Thursday, though management is reportedly still looking to avoid that outcome.
  • The People's Bank of China left its one-year and five-year loan prime rates at their respective 3.00% and 3.50%.
  • Japan sold 20-yr JGBs to solid demand and there was a report that a new JGB aimed at retail investors could be launched.
  • The Reserve Bank of New Zealand's mean household inflation expectations for two years out increased to 4.9% from 3.4%.
  • The U.K. is reportedly lobbying supermarkets to introduce price caps on essential times like eggs, bread, and milk.
  • European Central Bank policymaker Kocher said that a June rate hike is expected if there is no quick end to the Iran conflict.
  • Japan's May Reuters Tankan Index rose to 8 from 7.
  • Eurozone's April CPI was up 1.0% m/m (expected 1.0%; last 1.3%), rising 3.0% yr/yr (expected 3.0%; last 2.6%). April Core CPI was up 0.9% m/m (expected 0.9%; last 0.8%), rising 2.2% yr/yr (expected 2.2%; last 2.3%).
  • Germany's April PPI was up 1.2% m/m (expected 2.0%; last 2.5%), rising 1.7% yr/yr (expected 1.5%; last -0.2%).
  • U.K.'s April CPI was up 0.7% m/m (expected 0.9%; prior 0.7%), rising 2.8% yr/yr (expected 3.0%; last 3.3%). April Input PPI was up 2.4% m/m (expected 1.2%; last 4.3%), rising 7.7% yr/yr (expected 5.9%; prior 5.3%). April Output PPI was up 1.4% m/m (expected 1.0%; prior 1.4%), rising 4.0% yr/yr (expected 2.8%; prior 3.0%).
• Today's Data:
  • The weekly MBA Mortgage Index fell 2.3% to follow last week's 1.7% increase. The Purchase Index was down 2.3% while the Refinance Index was down 0.1%.
  • Weekly crude oil inventories decreased by 7.863 million barrels after decreasing by 4.306 million barrels a week ago.
  • $16 bln 20-year Treasury bond auction results (prior 12-auction average):
    • High yield: 5.122% (4.803%).
    • Bid-to-cover: 2.55 (2.64).
    • Indirect bid: 67.7% (64.4%).
    • Direct bid: 22.9% (24.1%).
• Commodities:
  • WTI crude: -5.7% to $98.19/bbl
  • Gold: +0.6% to $4535.50/ozt
  • Copper: +1.9% to $6.33/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1634
  • GBP/USD: +0.4% to 1.3446
  • USD/CNH: -0.2% to 6.7997
  • USD/JPY: -0.2% to 158.81
• The Day Ahead:
  • 8:30 ET: April Housing Starts (Briefing.com consensus 1.420 mln; prior 1.502 mln), Building Permits (Briefing.com consensus 1.380 mln; prior 1.372 mln), weekly Initial Claims (Briefing.com consensus 210,000; prior 211,000), Continuing Claims (prior 1.782 mln), and May Philadelphia Fed survey (Briefing.com consensus 15.5; prior 26.7)
  • 10:30 ET: Weekly natural gas inventories (prior +85 bcf)