HIGHLIGHTS:
- USD/CAD sheds 125 pips off highs as Trump considers last minute reprieve on "doubling" of Canadian steel, aluminium tariffs
- Equities rally off lows as US-Ukrainian representatives reach agreement on 30-day ceasefire proposals
- US CPI, BoC decision to be the market focus Wednesday
Treasuries rallied early before completing a reversal lower late Tuesday, with geopolitical and trade war headlines providing the impetus.
- Global core FI was on the front foot on the overnight restart as equity futures picked up where they left off Monday in setting fresh multi-month lows on US recession and trade war fears.
- Treasury yields started heading up from lows in the Asia-Pac through early Europe session, partly in tandem with a rebound in Bund yields with German fiscal expansion negotiations.
- JOLTS job openings were higher than expected, resulting in a modestly hawkish reaction on the highest TY volumes of the day, but this was was dominated by the negative growth angle from President Trump threatening 50% tariffs on Canadian steel and aluminum from tomorrow shortly afterwards.
- A solid 3Y auction and a move in equities to session lows saw yields pull back briefly, but a series of headlines saw equities pare losses and send Tsys to the session's worst levels: Ukraine agreeing to a US ceasefire proposal, then reports suggesting US and Canada/Ontario appearing to reach a temporary entente.
- The 5-10Y segment underperformed on the curve, though yields remained below last week's closing level.
- The 2-Yr yield is up 5.2bps at 3.9348%, 5-Yr is up 6.1bps at 4.0277%, 10-Yr is up 6.3bps at 4.276%, and 30-Yr is up 5.4bps at 4.5939%. Jun 10-Yr futures (TY) down 13/32 at 110-29.5 (L: 110-25.5 / H: 111-25)\
- The February CPI report is the scheduled highlight of Wednesday's session - MNI's preview is here - while some attention will be paid later in the morning to the Bank of Canada which is expected to deliver a 25bp cut (preview here).
MNI US CPI Preview: Calm Before The Tariff Storm
- Analyst unrounded estimates see core CPI inflation easing to a still solid 0.28% M/M in February after a far stronger than expected 0.45% M/M in January.
- The initial PCE implications plus the readthrough from details within Thursday’s PPI report will ultimately set the tone of the two releases.
- This report won't influence March's FOMC decision, but with only one more report before the May decision, the main risk given current market pricing is that the data could largely cement a "hold" until at least June.
- Download Full Report Here
CANADA: MNI BoC Preview: Easing Amidst Even Greater Uncertainty
We have published and e-mailed to subscribers the MNI BoC Preview ahead of tomorrow’s decision.
Please find the full report here: https://media.marketnews.com/BOC_Preview_Mar2025_032b75b9b1.pdf
US TSYS/OVERNIGHT REPO: SOFR Continued To Soften Monday
Secured rates softened for a second consecutive session Monday, with SOFR dipping by 1bp again to 4.33%, matching the lowest levels of the month.
- Rates could soften a little further today with cash returning to market due to bill redemptions which should help the downward drift in rates.
- Meanwhile, effective Fed Funds rates were once again unchanged.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.33%, -0.01%, $2505B
* Broad General Collateral Rate (BGCR): 4.32%, -0.01%, $960B
* Tri-Party General Collateral Rate (TGCR): 4.32%, -0.01%, $931B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $105B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $292B
US TSYS/OVERNIGHT REPO: Overnight Reverse Repo Takeup Picks Back Up
Takeup of the Fed's overnight reverse repo facility continued to fluctuate Tuesday, rising $8.3B to $137.3B (after falling $7.3B prior and rising $7.0B two sessions ago).
- The rise is not unexpected, as we had flagged ON RRP takeup could rise in line with large Treasury bill paydowns Tuesday, and this keeps takeup in recent ranges.
US SOFR/TREASURY OPTION SUMMARY
Tuesday's U.S. rates/bond options flow included:
- SFRM5 96.25/96.75cs, bought for 6 in 5k.
- SFRU5/SFRZ5 95.87/95.62/95.37p fly, bough the Sep for flat in 2.5k.
- 0QM5 97.25c vs 2QU5 97.37c, spread, bough the 2yr for 0.25 in 15k.
- 2QU5 97.50c, bought for 8 in 10k total now.
EGBs-GILTS CASH CLOSE: Twist Steepening As Bunds Underperform
Long-end yields backed up Tuesday across European curves, with periphery EGBs and Gilts outperforming Bunds.
- Monday's Bund outperformance - which was due to potential Green Party opposition to fiscal expansion - reversed Tuesday after the Greens signaled hopes for a defence spending deal by the end of this week.
- Once again, though, curve short-ends rallied as global equities continued to correct, led by US recession/trade war concerns.
- The German and UK curves twist steepened.
- Periphery / semi-core EGB spreads tightened.
- Wednesday's schedule includes multiple speakers at an ECB conference and the release of the ECB Wage Tracker, while the global data highlight is US CPI.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.7bps at 2.199%, 5-Yr is up 2.8bps at 2.519%, 10-Yr is up 6.4bps at 2.897%, and 30-Yr is up 6.6bps at 3.187%.
- UK: The 2-Yr yield is down 2.2bps at 4.173%, 5-Yr is up 0.4bps at 4.289%, 10-Yr is up 3bps at 4.674%, and 30-Yr is up 5.7bps at 5.283%.
- Italian BTP spread down 1.5bps at 111.7bps / Spanish down 2.5bps at 62.8bps
EUROPE OPTIONS: Profit Taking And Upside Trades In European Rates Tuesday
Tuesday's Europe rates/bond options flow included:
- DUK5 106.40/106.10ps, bought for 7.75 in 4.5k.
- RXJ5 129c, bought for 23.5 in 6k.
- ERH5 97.75/97.62/97.50/97.37p condor, sold at 11 in 10k (said to be profit taking).
- ERK5 97.9375/98.00/98.0625c fly, bought for 0.75 in 2.5k.
- ERM5 97.9375/98.0625 call spread, paper pays 2-2.25 on 15k
- ERM5 98.12/98.25cs, bought for half in 5k
- ERM5 97.8125/98.00cs vs 1.5x 97.6875p, bought the cs for -0.75 in 20k vs 15k at 97.785.
- ERU5 98.125/98.25cs vs 97.625p, bought the Put for 2.75 in 10k (ref 97.89)
- ERH6 97.62/97.50ps, bought for 3.75 in 5k.
- SFIK5 95.80/95.90/96.00/96.10 call condor, paper pays 4.25 on +7.5k
- SFIK5 95.75/95.70/95.60p Ladder, bought for 0.25 in 2k.
FX: CAD Surges Back to Positive as Ontario Rolls Back Electricity Surcharge
USD/CAD corrects lower on the Ford headlines - Trump was particularly critical of the electricity surcharges levied against US consumers on Truth Social earlier today, which may be playing out in Ontario's decision to suspend the measures. Some positivity also clearly being read into Ford's comment that a "renewed" USMCA deal will be discussed ahead of the April 2nd reciprocal tariff deadline.
- USD/CAD is now pressuring earlier daily lows of 1.4394, meaning the pair has shed ~125 pips off the daily high. Clearance and close below 1.4394 would help the formation of a bearish candle on the daily charts, however the pair remains sharply higher on the week.
- The Thursday/Friday USD/CAD candles resemble a bullish engulfing line - and spot will have to trade through 1.4280 to erase any positive signals from this formation. This keeps the BoC decision tomorrow particularly live (see our preview for this just above), mirrored in the jerk higher for overnight CAD vols today (up to 12 points from ~7 points at the beginning of the week).
FX OPTIONS: Expiries for Mar12 NY cut 1000ET (Source DTCC)
- USD/JPY: Y146.85-00($516mln), Y148.00($1.3bln)
- USD/CAD: C$1.4380($574mln)
- USD/CNY: Cny7.2000($1.0bln), Cny7.2200($1.0bln), Cny7.2500($953mln)
EQUITIES: Cash S&P 500 Shifts Positive on Positive Ukraine, Canada Headlines
- Initially spurred by the Ukraine ceasefire headlines, stocks extend hteir recovery off lows, with the cash S&P 500 broadly back to unchanged to erase the day's deficit. Intraday price action has seen a further jolt higher as Ontario's Ford confirms they have suspended a 25% electricity surcharge that had targeted the US - a sign of reconciliation between the US and Canada. The bounce sticking in recent trade, as oversold tech names and consumer discretionary stocks begin to creep higher.
- These sectors have been the laggards since the Trump inauguration, and the marginal good news that Ukraine could accept terms on a US-proposed ceasefire has been sufficient to prompt a short-covering based rally. Markets await confirmation from Moscow on any deal here - which could serve as a further positive catalyst.
- Infitting with the bounce theme, single stocks that have suffered the brunt of recent weakness are sharply higher: Tesla and Netflix shares are gaining ~5% apiece.
- The e-mini S&P is back above the 5600 level having printed down at 5534.00 earlier today - firm resistance to watch remains 5979.06, the 50-day EMA.
EQUITY TECHS: E-MINI S&P: (H5) Impulsive Sell-Off Extends
- RES 4: 6178.75 High Dec 6 ‘24 and key resistance
- RES 3: 6166.50 High Jan 19
- RES 2: 5979.06 50-day EMA
- RES 1: 5791.00/5912.01 High Mar 7 / 20-day EMA
- PRICE: 5630.75 @ 05:52 GMT Mar 11
- SUP 1: 5558.00 Intraday low
- SUP 2: 5523.00 Low Sep 11 2024
- SUP 3: 5499.25 Low Sep 9 2024
- SUP 4: 5444.55 76.4% retracement of the Aug 5 - Dec 6 ‘24 bull leg
A bear threat in S&P E-Minis remains present and Monday’s extension strengthens bearish conditions. The move down also reinforces the significance of the breach of 5809.00, the Jan 13 low. This level marked the mid-point of a double top on the daily chart and the break confirms the pattern and an important short-term reversal. Sights are on 5499.25, the Sep 9 2024 low. Firm resistance to watch is 5979.06, the 50-day EMA.
COMMODITIES: Precious Metals Rally Amid Tariff Uncertainties, WTI Gains
- Spot gold has risen by 1.1% to $2,921/oz today, keeping it within sight of last month’s record high at $2,956.
- On-going tariff uncertainties and talk of a US recession have added to haven demand for the yellow metal, which analysts at JP Morgan say could set up a very constructive scenario for gold in H2.
- From a technical perspective, gold is in consolidation mode. The trend condition remains bullish, however, and a stronger rally would refocus attention on $2,962.2, a Fibonacci projection.
- Meanwhile, silver is outperforming today, with a 2.6% rally to $32.95/oz, the highest level since Feb 21.
- A continuation higher would refocus attention on the bull trigger at $33.397, the Feb 14 high. Clearance of this level would resume the uptrend, opening $34.0 round number resistance.
- WTI is higher on the day to regain some of yesterday’s decline. Pressure remains amid rising global growth concerns and the return of OPEC+ barrels.
- The market remains bearish overall, although a squeeze on Venezuelan and Iranian supply via sanctions could add some upside.
- WTI Apr 25 is up by 0.7% at $66.5/bbl.
- For WTI futures, a bearish trend condition in remains intact, with recent weakness paving the way for an extension towards $63.61, the Oct 10 ‘24 low. Key short-term pivot resistance is seen at $70.21, the 50-day EMA.
DATA/EVENTS CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 12/03/2025 | 0001/0001 | * |  GB | RICS House Prices |
| 12/03/2025 | 0730/0730 | GB | DMO propose calendar for first 3 weeks of FY25/26 | |
| 12/03/2025 | 0845/0945 |  EU | Lagarde at "ECB and Its Watchers" conference Frankfurt | |
| 12/03/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 12/03/2025 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 12/03/2025 | 1100/1200 | EU | ECB Wage Tracker | |
| 12/03/2025 | - | *** |  CN | New Loans |
| 12/03/2025 | - | *** | CN | Money Supply |
| 12/03/2025 | - | *** | CN | Social Financing |
| 12/03/2025 | 1230/0830 | *** | US | CPI |
| 12/03/2025 | 1345/0945 | *** |  CA | Bank of Canada Policy Decision |
| 12/03/2025 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 12/03/2025 | 1515/1615 | EU | Lane at "ECB and Its Watchers" conference Frankfurt | |
| 12/03/2025 | 1700/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 12/03/2025 | 1800/1400 | ** | US | Treasury Budget |
| 13/03/2025 | 0700/0800 | *** |  SE | Inflation Report |
| 13/03/2025 | 0950/1050 | EU | de Guindos in fireside chat at EIOPA Sustainable Finance Conference | |
| 13/03/2025 | 1000/1100 | ** | EU | Industrial Production |
| 13/03/2025 | 1230/0830 | * | CA | Building Permits |
| 13/03/2025 | 1230/0830 | * | CA | Household debt-to-income |
| 13/03/2025 | 1230/0830 | *** | US | Jobless Claims |
| 13/03/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 13/03/2025 | 1230/0830 | *** | US | PPI |
| 13/03/2025 | 1400/1000 | * | US | Services Revenues |
| 13/03/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 13/03/2025 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 13/03/2025 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 13/03/2025 | 1700/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |