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EXECUTIVE SUMMARY

  • MNI BRIEF: Fed Minutes Show Upbeat But Patient Policy Stance
  • MNI POLICY: Yellen Treasury Proposes $2.5T Tax Proposal
  • MNI INTERVIEW: Fed Seeks Community Input To Weigh Jobs Progress
  • MNI BRIEF: US Record Retailer Imports Seen Through Summer
  • Chicago Fed EVANS `VERY OPTIMISTIC' ON U.S. GROWTH PROSPECTS" but "ACHIEVING FED'S INFLATION GOAL MAY PROVE MORE DIFFICULT, Bbg
  • Dallas Fed KAPLAN SEES U.S. GDP GROWTH OF APROX. 6.5% IN 2021, Bbg
    U.S. IN MIDDLE OF OVERALL REVIEW OF CHINA POLICY: COMMERCE SEC RAIMONDO
  • U.S. IN MIDDLE OF OVERALL REVIEW OF CHINA POLICY: COMMERCE SEC RAIMONDO

US

FED: Federal Reserve officials became more upbeat about the economy's prospects in the minutes of last month's meeting, while showing no hint of taking their foot off the monetary accelerator amid vaccine progress and more fiscal relief.
  • "Participants observed that the pace of the economic recovery had picked up recently and that the economy continued to show resilience in the face of the pandemic," the minutes said. "Participants reaffirmed the Federal Reserve's commitment to using its full range of tools to support the U.S. economy during this challenging time."
US TSYS: U.S. Treasury Secretary Janet Yellen Wednesday released a report proposing to raise USD2.5 trillion in tax revenue over 15 years, aiming to pay for President Joseph Biden's infrastructure plan, reduce inequality and curtail corporate profit shifting.
  • The report, which focuses on corporate tax reform and reforming tax incentives, calls for increasing the corporate rate to 28% from 21% currently, raising global intangible low-taxed income (GILTI), enacting a 15% minimum tax on book income of large companies, increasing enforcement of tax avoidance, and aims to eliminate profit shifting by U.S. multinational companies with proposals to repeal and replace the Base Erosion and Anti-Abuse Tax (BEAT). For more see MNI Policy main wire at 1130ET.
FED: The Federal Reserve is meeting with community leaders more than scheduled as it seeks to determine its progress towards redefined employment goals and wade through heightened uncertainty from the Covid shock, a member of the central bank's Community Advisory Council told MNI.
  • "We did meet throughout the year and had more meetings than normal," said Lora Smith, executive director of the Appalachian Impact Fund in Eastern Kentucky. "The chairman was very engaged with us," she said of Fed Chair Jerome Powell.
  • Shortages of jobs and affordable housing are far greater problems for distressed communities like the one Smith's fund serves than concerns over rising prices, she said. For more see MNI Policy main wire at 1132ET.
US: Surging retail imports at U.S. ports should continue through at least the end of the summer, the National Retail Federation said Wednesday, as retailers work to meet high consumer demand for goods. Incoming cargo is expected to remain at or above 2 million twenty-foot equivalent units through August, according the NRF's global port tracker, produced jointly with Hackett Associates.

Evans: Economy Faces Many Uncertainties, DJ
Evans: Expects Inflation to Rise Over Coming Months, DJ

Fed's Evans: Fed Still Has Some Ways to Go to Meet Mandates, Bbg

OVERNIGHT DATA

  • US FEB TRADE GAP -$71.1B VS JAN -$67.8B
  • US MBA: MARKET COMPOSITE -5.1% SA THRU APR 02 WK
  • US MBA: REFIS -5% SA; PURCH INDEX -5% SA THRU APR 2 WK
  • US MBA: UNADJ PURCHASE INDEX +51% VS YEAR-EARLIER LEVEL
  • US MBA: 30-YR CONFORMING MORTGAGE RATE 3.36% VS 3.33% PREV
  • CANADIAN FEB TRADE BALANCE +1.0B CAD
  • CANADA FEB EXPORTS 49.9 BLN CAD, IMPORTS 48.8B CAD
  • CANADA REVISED JAN MERCHANDISE TRADE BALANCE +1.2B CAD

US TSY SUMMARY: Duration Extends Sell-Off After Bell

Myriad Fed speakers continued to tow the Fed company line pre/post the release of the March FOMC minutes Wednesday.
  • Fed Pres' Evans, Kaplan, Barkin, Daly and Fed Gov Brainard all see a brighter economic outlook ahead, transitory inflation pressures still a sign of improving strength while "participants reaffirmed the Federal Reserve's commitment to using its full range of tools to support the U.S. economy during this challenging time."
  • Meanwhile Tsy Sec Yellen released a report proposing to raise $2.5T in tax revenue over 15 years, aiming to pay for President Joseph Biden's infrastructure plan, reduce inequality and curtail corporate profit shifting. Tsy Link
  • Long bonds made new lows after the bell, loosely mirroring a late drop in equities off near record highs (ESM1around 4063.0 after the FI close). Yld curves bent steeper, but still well off late Feb highs with 5s30s around 148.50 after the bell.
  • Large Eurodollar futures and option flows: Block: 20,000 Red packs (EDM2-EDH3) at +0.0175 from 1032-1043ET, most likely swapped but not seeing other side. Taking a stand on Summer 2023 volatility: near +40,000 Green Jun 92 straddles from 21.25 to 22.5.
  • The 2-Yr yield is down 0.8bps at 0.1586%, 5-Yr is down 5bps at 0.8721%, 10-Yr is down 4.3bps at 1.6578%, and 30-Yr is down 2.6bps at 2.3207%.

Short Term Rates

US DOLLAR LIBOR: Latest settles

  • O/N -0.00163 at 0.07625% (+0.00150/wk)
  • 1 Month +0.00237 to 0.11250% (+0.00212/wk)
  • 3 Month -0.00375 to 0.19363% (-0.00612/wk) (Record Low of 0.17525% on 2/19/21)
  • 6 Month +0.00900 to 0.21000% (+0.00875/wk)
  • 1 Year -0.00100 to 0.28525% (+0.00475/wk)
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 0.07% volume: $74B
  • Daily Overnight Bank Funding Rate: 0.07%, volume: $255B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 0.01%, $979B
  • Broad General Collateral Rate (BGCR): 0.01%, $378B
  • Tri-Party General Collateral Rate (TGCR): 0.01%, $349B
  • (rate, volume levels reflect prior session)
FED: NY Fed Operational Purchase
  • Tsy 4.5Y-7Y, appr $6.001B accepted vs. $19.337B submission
  • Next scheduled purchases:
  • Thu 4/08 1010-1030ET: TIPS 1Y-7.5Y, appr $2.425B
  • Fri 4/09 1010-1030ET: Tsy 7Y-20Y, appr $3.625B

PIPELINE: High-Grade Issuance Review

$12.7B to price Wednesday

  • Date $MM Issuer (Priced *, Launch #)
  • 04/07 $5B *Asia Development Bank (ADB) 5Y +2
  • 04/07 $3B #Ontario 5Y +11
  • 04/07 $1.5B #United Overseas Bank (UOB) $750M 5Y +48, $750M 10.5NC5.5 +123
  • 04/07 $850M *EBRD 5Y FRN SOFR+19
  • 04/07 $800M #Pacific Life Global 5Y +53
  • 04/07 $550M #Northern Natural Gas +30Y +110
  • 04/07 $500M #Brookfield Finance 10Y +107
  • 04/07 $500M #Jabil 5Y +85
  • Later in week:
  • 04/08 $3.5B Organon $2B 7NC3, $1.5B 10NC
  • 04/08 $1B Canadian Pension Plan (CPPIB) WNG 3.5Y +2
  • 04/08 $500M AIIB WNG 5Y FRN SOFR+24a
  • 04/08 $Benchmark KFW 2Y +0
  • 04/08 $Benchmark Japan Bank of Int Cooperation (JBIC) WNG 3Y +9a, 10Y +26a

FOREX: Sterling Softens as Key Vaccine Restricted for Under-30s

  • Speculation swirled ahead of a press conference from the UK's medicines regulator, which moved to restrict the distribution of the most widely used vaccine for those aged below 30. While the vaccine committee stressed that there was little risk to the overall vaccine plan, markets remain concerned that the switch could result in a delay to the planned easing of virus restrictions.
  • This dampened sentiment hit GBP, which fell against all others in G10, and extended the pullback from the midweek highs to over 150 pips. Next support for GBP/USD undercuts at the 100-dma at 1.3678.
  • Further demonstrating the risk-off theme were slips in antipodean currencies, with AUD and NZD falling alongside GBP. Similarly, the CHF and JPY were among the session's best performers.
  • Focus Thursday turns to Japanese trade balance and US weekly jobless claims data. Central bank speakers include Fed's Powell, Kashkari & Bullard.

EGBs-GILTS CASH CLOSE: Eventful Session For Vaccines And Supply

A very busy session saw an early move into safe havens fade, but Bunds and Gilts ended stronger nonetheless. Periphery spreads ended a little wider, with large demand for BTP syndication.
  • Syndications today: Italy sold new 50-yr BTP (E7bn) and tapped 7-yr syndication (E5bn) on combined books >E130bn; Portugal raised E4bn of 10-Yr PGB on books >E30bn. In auctions, Germany allotted E3.3bn of Bobl and UK GBP5bln total of Gilts.
  • In data, Spain March services PMI beat expectations, while Italy missed; both <50.
  • Afternoon attention was on dual press conferences by the EU and UK vaccine regulators on the AstraZeneca jab's potential links with blood clotting. EMA noting that vaccine's clots as a rare side effect, but otherwise no action taken, EU ministers to discuss at 1700BST. UK will offer under-30s an alternative (eg Moderna) but not expected to slow overall vaccine rollout.

Closing yields/10-Yr Spreads to Bunds:

  • Germany: The 2-Yr yield is down 0.2bps at -0.703%, 5-Yr is down 0.8bps at -0.657%, 10-Yr is down 0.8bps at -0.324%, and 30-Yr is down 0.4bps at 0.231%.
  • UK: The 2-Yr yield is down 1.1bps at 0.064%, 5-Yr is down 1.5bps at 0.358%, 10-Yr is down 2.4bps at 0.773%, and 30-Yr is down 2.2bps at 1.315%.
  • Italian BTP spread up 0.8bps at 101.7bps/ Spanish spread up 0.5bps at 66.6bps