Bond Market Update

Rebound Accelerates

• U.S. Treasuries are on track for a firmly higher start that will lift the complex into positive territory for the week after an overnight advance in Treasury futures and other sovereign debt. Those gains coincided with significant weakness in crude oil, which has slid back below $100/bbl, after President Trump ordered a pause to the U.S. control over movement of ships through the Strait of Hormuz due to progress in negotiations with Iran's leadership. The news has given a big boost to risk sentiment with global equity market sporting big gains and U.S. equity futures pointing to a firmly higher start on Wall Street. On a side note, there has also been some speculation about a foreign exchange intervention from Japan's Ministry of Finance after the yen extended last week's bounce against the dollar. Economic data released overnight included mostly contractionary Services PMI readings from major economies while China's private sector reading showed an acceleration in growth. The U.S. Dollar Index is down 0.7% at 97.80, reaching its lowest level since late February.
• Yield Check:
  • 2-yr: -8 bps to 3.86%
  • 3-yr: -8 bps to 3.89%
  • 5-yr: -8 bps to 3.99%
  • 10-yr: -7 bps to 4.35%
  • 30-yr: -5 bps to 4.93%

• News:
  • China has called on the U.S. to drop the Section 301 investigation into China's excess capacity ahead of President Trump's upcoming meeting with President Xi.
  • France's President Macron is expected to name Emmanuel Moulin to succeed outgoing Bank of France Governor Villeroy de Galhau. Mr. Moulin previously served as secretary general to the president.
  • Bank of England Governor Bailey said that investors should be mindful of risks associated with private credit.
  • China's April RatingDog Services PMI 52.6 (expected 52.0; last 52.1)
  • South Korea's April CPI 0.5% m/m, as expected (last 0.3%); 2.6% yr/yr, as expected (last 2.2%)
  • Hong Kong's April Manufacturing PMI 48.6 (last 49.3) and March Retail Sales 12.8% yr/yr (last 19.3%)
  • New Zealand's Q1 Employment Change increased 0.2% qtr/qtr (expected 0.3%; last 0.5%) and Q1 Labor Cost Index was up 0.5% qtr/qtr (expected 0.4%; last 0.4%). Q1 Unemployment Rate fell to 5.3% from 5.4% (expected 5.4%) and Participation Rate dipped to 70.4% from 70.5% (expected 70.5%). April AIG Construction Index rose to -19.3 from -57.1 and AIG Manufacturing Index rose to -27.9 from -28.6.
  • India's April Services PMI hit 58.8 (expected 57.9; last 57.5).
  • Eurozone's April Services PMI hit 47.6 (expected 47.4; last 50.2). March PPI was up 3.4% m/m (expected 3.3%; last -0.6%), rising 2.1% yr/yr (expected 1.8%; last -3.0%).
  • Germany's April Services PMI hit 46.9, as expected (last 50.9).
  • U.K.'s April Services PMI hit 52.7 (expected 52.0; last 50.5).
  • France's March Industrial Production rose 1.0% m/m (expected 0.5%; last -0.9%). April Services PMI hit 46.5, as expected (last 48.8).
  • Italy's April Services PMI hit 49.8 (expected 47.9; last 48.8). March Retail Sales rose 0.8% m/m (expected -0.4%; last -0.1%), increasing 3.7% yr/yr (last 1.6%).
  • Spain's April Services PMI hit 47.9 (expected 51.9; last 53.3).
• Commodities:
  • WTI Crude: -10.6% to $91.53/bbl
  • Gold: +3.1% to $4710.80/ozt
  • Copper: +3.1% to $6.183/lb
• Currencies:
  • EUR/USD: +0.7% to 1.1770
  • GBP/USD: +0.6% to 1.3622 
  • USD/CNH: -0.2% to 6.8098
  • USD/JPY: -1.1% to 156.06
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual -4.4%; prior -1.6%)
  • 8:15 ET: April ADP Employment Change (Briefing.com consensus 79,000; prior 62,000)
  • 8:30 ET: Treasury Quarterly Refunding Announcement
  • 10:30 ET: Weekly crude oil inventories (prior -6.234 mln)