MNI ASIA OPEN - Biden Budget Sees Largest $ Rise in Tax Take Ever

NEWS

FED (MNI): US Covid Fiscal Relief Boosted Inflation 3PP-SF Fed Paper
U.S. fiscal stimulus was a key driver in boosting inflation by 3 percentage points and taking it well above rates in other industrialized nations, San Francisco Fed economists wrote in a paper published Monday, an estimate at the high end of other recent research. Americans saw disposable income rise about 15% through the two major pandemic relief plans Congress passed in 2020 and 2021, while it was little changed across a sample of OECD countries, according to the paper. U.S. core inflation doubled to more than 4% during this period while in the peer group the increase was to 2.5% from 1%.

US (MNI): US Rent Growth Seen Moderating In '22 - Yardi
The surge in rents for new U.S. tenants should ease up over the next year and could soften to around half of what was seen in 2021, Doug Ressler of real estate data firm Yardi Matrix told MNI. Asking rents, the rents asked of new as opposed to incumbent tenants, have skyrocketed and reached a new high of 15.4% over the 12 months ending in February, likely contributing close to three-quarters of a percentage point to the consumer price index and about a third a percentage point to PCE inflation later this spring and summer, he said.

US (MNI): President Biden has taken questions following his FY23 budget announcement at the White House. The questions have been dominates by his 'gaff' in Warsaw when he delivered an unscripted remark 'Putin cannot remain in power:'

• Biden: 'I'm not walking anything back. I was expressing the moral outrage Ifelt at the actions of this man. The brutality. I want to make it clear thatI was not articulating a policy change and make no apologies for it.'* Biden says he doesn't think his comments complicate the diplomatic effort.
• Biden: 'Nobody believes we're going to be taking down Putin.'
• The gaff in Warsaw has significantly undermined the White House budget announcement. The President appeared fatigued and short tempered under sharp questioning. Republicans have already taken to twitter to criticise Biden for his presser.
• Rep Nan Heyworth (R-NY): 'Biden at his presser just now, scoffing at the notion of taking him at his word: "NOBODY BELIEVES we're going to be taking down Putin." Well, he's right about his own credibility. Give him that.'

US (Bloomberg): President Joe Biden unveiled a $5.8 trillion budget request designed to appease moderate Democrats on Monday, with a proposal that emphasized deficit reduction, additional funding for police and veterans, and flexibility to negotiate new social spending programs. Congress historically sets presidential budgets aside, and razor-thin Democratic majorities mean most proposals stand a slim chance of passing -- but they do form a key messaging device. The White House included measures that would add up to the biggest tax increase in history in dollar terms, helping stabilize deficits relative to the size of the economy.

RUSSIA-UKRAINE (Bloomberg): Ukrainian and Russian negotiating teams plan to meet in Turkey this week with the conflict in its second month and big differences remaining on terms for a potential cease-fire deal.

RUSSIA-UKRAINE (Bloomberg): Russian billionaire Roman Abramovich and Ukrainian negotiators suffered a suspected poisoning after meetings in Kyiv at the beginning of the month as part of talks to end the war in Ukraine, according to people familiar with the situation. He and Ukrainians at the talks experienced peeling skin, red eyes, loss of eyesight and headaches, the people said, asking not to be identified because the information wasn’t public. The Wall Street Journal first reported the alleged poisoning.

UK (MNI): UK Sunak: Energy Prices Key To Next Fiscal Boost
UK Chancellor of the Exchequer Rishi Sunak, under fire for only partially offsetting the hit to living standards primarily from higher energy prices in his Spring Statement, held the door wide open to further fiscal support in the Autumn Budget, stressing that it was dependent on what happened to energy prices. Sunak, giving evidence to the Treasury Select Committee, defended his desire to lower the budget deficit saying that "an excessive amount of borrowing now is not the responsible thing to do ... because it may risk stoking inflation even further."

ITALY (MNI): EU Should Top Up Recovery Plans- Italy's Freni
The European Union should top up the EUR191.5 billion it has provided for Italy's National Recovery Plan, Undersecretary for Finance Federico Freni told MNI, adding that he expects the European Central Bank to continue buying bonds for longer due to soaring energy prices. Projects included in Italy's National Recovery Plan risk a "dangerous spiral of decline" without "a decisive intervention" to adjust for inflation, Freni said in an interview. The ECB is likely to continue for longer with its Asset Purchase Programme, which is set to run at EUR40 billion in April and then be phased out completely by the third quarter if data permits, he said.

FOREX: Japanese Yen Extends Decline Despite Intra-Day Recovery

• USDJPY remains 1.25% higher from Friday’s close, continuing the depreciating trend for the Japanese currency that has witnessed a 9% sell-off from peak-to-trough against the dollar throughout March.
• This comes despite a near 200-pip retracement from the intra-day highs above 125.00 before the pair consolidated around 123.60 as of writing.
• From our most recent technical analysis piece: It is fair to say that USDJPY is extremely overbought at current levels with today's impulsive rally touching a high of 125.09. We also highlight that the most recent portion of the uptrend, since Mar 11, is very steep suggesting that a sudden correction would not be a surprise. Indeed, this would be seen as a healthy trend development.
• The June 2015 high of 125.86 is a key resistance and if cleared, would highlight a broader bullish price sequence of higher highs and higher lows on the monthly chart that would reinforce the medium-term bullish argument. Short-term supports are seen at today’s low, 121.97, and then last Thursday’s low of 120.95.
• Elsewhere, higher front-end US TSY yields lent support to the greenback with the dollar index registering a 0.4% advance for Monday.
• USD strength and a 6.5% decline in crude futures weighed on the likes of CAD and NOK, however NZD (-1.05%) sat second from bottom of the G10 leaderboard despite the late bounce in equities.
• Strength in EURJPY kept EURUSD in a relatively narrow range to start the week with 1.10 capping the topside of Monday’s range.
• Minor data points due overnight are Japanese unemployment and Aussie retail sales before a relatively light European and US docket, headlined by JOLTS as we approach US employment figures scheduled for later this week.

US TSYS SUMMARY: Treasuries Maintain Flattening On Lockdown Fears, Aggressive Hiking

• Cash Tsys are hanging on for a large twist flattening after an even larger outright bear flattening this morning, kick-started by further supply-side disruption fears following the two-stage lockdown in Shanghai.
• This has been compounded by a tale of two auctions, with the 2Y seeing a modest tail and weak internals, before the 5Y subsequently stopped through and with further signs of healthier demand.
• 2YY +5.8bps at 2.328%, 5YY +0.7bps 2.553%, 10YY -0.9bps at 2.464% and 30YY -2.4bps at 2.560%.
• Fed Funds pricing has generally been wound back through the day but there remains a substantial 210bps of hikes priced over the six remaining meetings this year, weighing on the growth outlook further ahead.
• Various curve metrics are off earlier lows but remain historically flat: 5s30s at just 1bp (having earlier been inverted for the first time since 2006 with a low of -7bps ), whilst 2s10s are 14bps, within 20bps of the 2019 low and having last seen sustained inversion in early 2007 at the end of a hiking cycle rather than the start.
• Continued sizeable supply tomorrow with the $47B 7Y auction at 1300ET, along with a return to Fedspeak with Harker (2023 voter) due to give his first post-FOMC thoughts.