Bond Market Update

Pulling Back

• U.S. Treasuries are on track for a lower start with early action likely to see some volatility in response to this morning's heavy dose of data, which will include the Fed's preferred inflation gauge and a revision to Q1 GDP. Treasury futures retreated in early evening action before recovering the bulk of their losses as the night went on. There were reports of some renewed military action against Iran, which has weighed on sentiment while lifting the price of WTI crude back above $91/bbl. There were no big surprises in data released overnight and the Bank of Korea's policy meeting concluded with no rate change (2.50%). The U.S. Dollar Index is up 0.1% at 99.34.
• Yield Check:
  • 2-yr: +4 bps to 4.07%
  • 3-yr: +4 bps to 4.12%
  • 5-yr: +3 bps to 4.21%
  • 10-yr: +3 bps to 4.51%
  • 30-yr: +2 bps to 5.03%

• News:
  • The Bank of Korea left its policy rate at 2.50%, as expected, though a couple of rate hikes are being planned for the next six months.
  • Standard & Poor's affirmed Hong Kong's AA+ rating with a Stable outlook.
  • European Central Bank Chief Economist Lane said that secondary effects of inflation will be visible for a while even if the energy shock starts to recede, contributing to the market's view that a rate hike will be announced in June.
  • The EU is looking to tighten limits on duty-free steel imports from China.
  • Hong Kong's April trade deficit reached HKD29.5 bln (last deficit of HKD89.1 bln) as imports grew 44.4% m/m (last 41.2%) and exports rose 42.9% m/m (last 35.8%).
  • Australia's Q1 Building Capital Expenditure were down 3.8% qtr/qtr (last 2.5%), Q1 Private New Capital Expenditure increased 6.5% qtr/qtr (expected 1.2%; last 0.7%, and Q1 Plant/Machinery Capital Expenditure was up 18.1% qtr/qtr (last -1.3%).
  • New Zealand's January Budget deficit reached NZD9.31 bln (last deficit of NZD14.80 bln).
  • Eurozone's May Business and Consumer Survey rose to 93.5 from 93.2 (expected 92.8).
  • France's April PPI was down 2.1% m/m (last 1.9%) but up 2.1% yr/yr (last 0.0%).
  • Italy's May Business Confidence remained at 87.9 (expected 87.5) and Consumer Confidence rose to 93.4 from 90.8 (expected 90.1). April PPI was up 0.3% m/m (last 4.4%), rising 6.8% yr/yr (last 4.2%).
  • Spain's April Retail Sales were up 0.8% yr/yr (last 4.1%).
• Commodities:
  • WTI Crude: +3.0% to $91.35/bbl
  • Gold: -1.4% to $4387.60/ozt 
  • Copper: -0.2% to $6.328/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1618
  • GBP/USD: -0.1% to 1.3407
  • USD/CNH: +0.1% to 6.7810
  • USD/JPY: UNCH at 159.45
• Data out Today:
  • 8:30 ET: April Personal Income (Briefing.com consensus 0.5%; prior 0.6%), Personal Spending (Briefing.com consensus 0.4%; prior 0.9%), PCE Prices (Briefing.com consensus 0.5%; prior 0.7%), Core PCE Prices (Briefing.com consensus 0.3%; prior 0.3%), Q1 GDP -- second estimate (Briefing.com consensus 2.0%; prior 2.0%), Q1 GDP Deflator -- second estimate (Briefing.com consensus 4.5%; prior 3.6%), April Durable Orders (Briefing.com consensus 1.7%; prior 0.8%), Durable Orders ex-transport (Briefing.com consensus 0.5%; prior 0.9%), weekly Initial Claims (Briefing.com consensus 214,000; prior 209,000), and Continuing Claims (prior 1.782 mln)
  • 10:00 ET: April New Home Sales (prior 682,000)
  • 10:30 ET: Weekly natural gas inventories (prior +101 bcf)
  • 12:00 ET: Weekly crude oil inventories (prior -7.863 mln)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results