Bond Market Insights - Wed, 02 Apr 2025

Global bond markets were well-supported on Tuesday, driven by a combination of weaker economic data and heightened geopolitical uncertainty ahead of tonight’s US tariff announcements. US Treasury yields moved lower across the curve, with the 10-year yield declining by 4bps to 4.16%. 2yrs closed at 3.88%, a slight bull flattening.

March ISM Manufacturing Index fell sharply to 49.0, deeper into contraction territory and well below consensus expectations. New orders and employment components were notably weak, while prices paid jumped, sparking renewed stagflation concerns. JOLTS job openings data missed estimates, showing a decline of 172,000 in February, further pointing to cooling labour market conditions.

What’s Priced In?  OIS pricing now reflects an 80% probability of a 25bps cut by June, with approximately 78 basis points of easing priced in for the remainder of the year. Fed officials continue to strike a cautious tone, favouring a “wait-and-see” approach, keeping the status quo to avoid market volatility.

Eurozone government bonds were steady. CPI data for March printed broadly in line with expectations, with headline inflation at 2.2% y/y and core inflation marginally softer at 2.4%. Despite ongoing fiscal slippage concerns, EGB spreads have remained resilient, underpinned by improving fundamentals in peripheral countries and expectations that the ECB would provide a backstop in the event of any market stress.

The Reserve Bank of Australia kept the cash rate unchanged at 4.1%, in line with expectations. However, the RBA did not push back against market pricing for potential rate cuts, keeping the May meeting in play, particularly as inflation indicators soften.

Emerging market credit was mixed.

Sub-Saharan African sovereign bonds drifted lower throughout the session, while Nigeria’s FX reserves were reported at $23.1 billion, the highest in three years. Senegal underperformed amid IMF program uncertainty. Egypt outperformed, supported by Trumps assessment of a call with President El Sisi .

Latin American sovereign credit saw a constructive session, with Colombian and Pemex bonds tightening, as investors responded positively to recent comments from policymakers around debt strategy.

Looking ahead, all eyes will be on the Tariff Announcement and, really, who knows!

The day ahead

US tariff announcement expected 3pm Wednesday New York time.

US ADP employment, March, Factory orders, Feb.

ECB speak: Schnabel, Holzmann, Escriba