Bond Market Update

Higher Start Ahead

• U.S. Treasuries are on track for a modestly higher start, looking for an upbeat finish to a week that saw yields hit fresh highs for the year. Treasury futures began climbing in early evening action, continuing their slow advance into the night while other sovereign debt also climbed. The gains have taken place despite some renewed upward pressure on the price of oil, which has WTI crude back near $98/bbl. Overnight action saw a solid finish to the week from Asian equity markets while European indices are also looking for an upbeat finish. The U.S. session is likely to see reduced participation, especially in the afternoon, since capital markets will be closed on Monday for Memorial Day. The U.S. Dollar Index is up 0.1% at 99.34.
• Yield Check:
  • 2-yr: -1 bp to 4.08%
  • 3-yr: -2 bps to 4.13%
  • 5-yr: -3 bps to 4.23%
  • 10-yr: -4 bps to 4.55%
  • 30-yr: -3 bps to 5.08%

• News:
  • Kevin Warsh will be sworn in as Fed Chairman at 11:00 ET. 
  • China's National Development and Reform Commission pushed back on reports that technology firms were told not to accept foreign investment.
  • European Central Bank President Lagarde said that the central bank is particularly attentive to second-round effects of inflation while policymaker Demarco said that a June rate hike is likely.
  • Germany's defense minister said that his country's defense spending will exceed 4% of GDP this year.
  • Japan's April National CPI was up 0.1% m/m (last 0.4%), rising 1.4% yr/yr (last 1.5%). April National Core CPI was up 1.4% yr/yr (expected 1.7%; last 1.8%).
  • South Korea's May Consumer Confidence rose to 106.1 from 99.2.
  • New Zealand's Q1 Retail Sales were up 0.9% qtr/qtr (expected 0.5%; last 0.9%) and Core Retail Sales rose 1.0% qtr/qtr (expected 0.8%; last 1.5%).
  • Germany's Q1 GDP expanded 0.3% qtr/qtr, as expected (last 0.2%), growing 0.4% yr/yr (expected 0.3%; last 0.4%). June GfK Consumer Climate rose to -29.8 from -33.1 (expected -33.7). May ifo Business Climate Index rose to 84.9 from 84.5 (expected 84.2). May Current Assessment rose to 86.1 from 85.4 (expected 85.1) and Business Expectations rose to 83.8 from 83.5 (expected 83.5).
  • U.K.'s April Retail Sales were down 1.3% m/m (expected -0.6%; last 0.6%) and unchanged yr/yr (expected 1.3%; last 1.4%). April Core Retail Sales were down 0.4% m/m (expected -0.3%; last 0.1%), rising 1.1% yr/yr (expected 1.5%; last 1.5%). April Public Sector Net Borrowing reached GBP24.30 bln (expected GBP20.70 bln; last GBP11.50 bln).
  • France's May Business Survey rose to 102 from 100 (expected 100).
• Commodities:
  • WTI Crude: +1.6% to $97.87/bbl
  • Gold: -0.4% to $4522.50/ozt
  • Copper: +0.7% to $6.336/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1597
  • GBP/USD: -0.1% to 1.3421
  • USD/CNH: UNCH at 6.7970
  • USD/JPY: +0.1% to 159.12
• Data out Today:
  • 10:00 ET: Final May University of Michigan Consumer Sentiment (Briefing.com consensus 48.2; prior 48.2) and April Leading Index (Briefing.com consensus -0.3%; prior -0.6%)