Bond Market Update

An Oil Slick

• U.S. Treasuries have started the week under some selling pressure that has effectively erased Friday's gains. The selling has been precipitated by rising oil prices, which have responded to President Trump rejecting Iran's conditional proposal for reopening the Strait of Hormuz. WTI crude futures are up 3.5% to $95.62/bbl, and Brent crude futures are up 3.0% to $100.42/bbl. The U.S. and Iran will reportedly keep talking this week, but at the moment, the market is taking a "talk is cheap" view of matters. There is no economic data of note today, yet this week will feature a host of key releases that include the Consumer Confidence, Personal Income and Spending, ISM Manufacturing PMI, and Employment Situation reports.
• Yield Check:
  • 2-yr: +6 bps to 4.91%
  • 3-yr: +6 bps to 4.99%
  • 5-yr: +6 bps to 5.05%
  • 10-yr: +6 bps to 5.22%
  • 30-yr: +3 bps to 5.52%

• News:
  • President Trump rejected Iran's ceasefire proposal and told aides he expects to resume bombing after the midterms. U.S. officials say talks are continuing between the two sides. WSJ
  • President Trump says the U.S. and Iran are expected to continue talks this week but remain far apart. Axios
  • Negotiators want Iran to make nuclear concessions. WSJ
  • White House advances a fair and reciprocal relationship with China; both countries cut tariffs on $30 bln of goods; established the U.S.-China Super Intelligence dialogue to exchange views
  • The Trump administration's plan to reduce U.S. reliance on China for critical minerals is starting to work, according to WSJ
  • President Trump tells reporters he is looking "very seriously" at a diesel export ban. Bloomberg
  • President Trump to make an announcement at 2pm ET from the Oval Office, per White House schedule
  • President Trump reverses Biden-era fuel economy standards. Truth Social
  • Saudi Arabia restarts oil exports using East-West oil pipeline, according to Bloomberg
• Commodities:
  • WTI crude: +3.5% to $95.62/bbl
  • Gold: -3.1% to $4,187.70/ozt
  • Copper: -2.0% to $6.63/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1374
  • GBP/USD: +0.1% to 1.3263
  • USD/CNH: -0.1% to 6.7148
  • USD/JPY: -0.3% to 156.86
• The Day Ahead:
  • There is no U.S. economic data of note
  • 08:15 ET: Fed Governor Bowman (FOMC voter) speech on developments in bank supervision and regulation
  • 13:25 ET: Fed Governor Cook (FOMC voter) on AI and emerging tech