EXECUTIVE SUMMARY
- Trump U-turns on Canada tariffs as Ontario suspend surcharge on electricity exports
- US, Ukraine reach agreement on proposal for 30-day ceasefire
- MNI INTERVIEW: Fed Nearly Done Easing Barring Slump-Benigno
- MNI: Canada Must Spend On Tariff Fight, New Markets-Farmers
- MNI US CPI Preview: Calm Before The Tariff Storm
- US DATA: JOLTS Report Shows Labor Moderation Stalling After Large Rebalancing
NEWS
FED (MNI INTERVIEW): Federal Reserve officials will likely cut interest rates once or twice this year if inflation eases further or growth begins to flag, but the easing cycle is nearly finished barring a deeper downturn, former New York Fed economist Gianluca Benigno told MNI. “They are very cautious in terms of moving forward because they see sticky inflation, they don’t see the progress they expected especially on the service side, and now there’s a risk that goods inflation might contribute rather than subtract from inflation,” he said in an interview.
MNI US CPI Preview: 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. 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.
US/CANADA (MNI): Farm industry leaders tell MNI they are pushing Canada's government to pay compensation for losses in a prolonged U.S. trade war and spend on expanded port and rail lines moving goods to new overseas markets, pressuring officials who are already missing deficit targets.
UKRAINE/RUSSIA (BBG): Ukraine Accepts US-Brokered Ceasefire Plan in Exchange for Aid
Ukraine accepted a US proposal for a 30-day truce with Russia as part of a deal with the Trump administration to lift a freeze on military aid and intelligence for Kyiv. The agreement laid out in a joint statement follows eight hours of talks in Saudi Arabia on Tuesday that raised the possibility of a pause of hostilities in Russia’s three-year war that’s ravaged Ukraine. The US will now take the proposal to Russia’s President Vladimir Putin to seek his agreement. “Hopefully President Putin will agree to that also, and we can get this show on the road,” President Donald Trump told reporters at the White House.
US/CANADA (BBG): Trump Reconsiders Tariff Hike After Ontario Halts Energy Charge
President Donald Trump said he was reevaluating plans to double steel and aluminum tariffs on Canada to 50% after Ontario announced it would suspend a 25% surcharge on electricity sent to the US. "I’m looking at that, but probably so,” Trump told reporters Tuesday when asked if the deescalation would lead him to back down on his tariff threat. “I’ll let you know about it.” Trump’s reconsideration looked to calm a brief but dramatic volley in the widening trade war between the US and Canada that has rocked markets and hung a cloud of uncertainty across major North American industries.
US/CANADA (MNI POLITICAL RISK): Canadian Prime Minister-designate Mark Carney has pledged to keep Canadian trade countermeasures in place, after US President Donald Trump's trade war escalation today. Carney said on X: "President Trump’s latest tariffs are an attack on Canadian workers, families, and businesses. My government will ensure our response has maximum impact in the US and minimal impact here in Canada, while supporting the workers impacted. My government will keep our tariffs on until the Americans show us respect and make credible, reliable commitments to free and fair trade."
US (MNI POLITICAL RISK): White House Press Secretary Karoline Leavitt has told reporters that she "echoes" President Donald Trump's sentiment that the US economy is in a "transition period" from an "economic nightmare" under the Biden administration to a "golden age" under Trump. When asked if the White House can "reassure Americans that there's not going to be a recession", Leavitt says when it comes to the stock market and economic numbers - likely referring to jobs data this week and CPI tomorrow - are a "snapshot of a moment in time". Leavitt: "As President Trump has said... We are in a period of economic transition. We are in a period of transition from the mess that was created [by Biden]. Joe Biden left this country in an economic disaster."
PORTUGAL (BBG): Portugal’s Government Collapses After Losing Parliamentary Vote
Portugal’s parliament toppled Prime Minister Luis Montenegro’s center-right minority government in a confidence vote Tuesday, likely leading the country to its third early election in just over three years. The premier requested the confidence vote last week, saying he wanted to clarify whether his minority government had “all the conditions” to carry out its program after struggling to put an end to speculation about potential conflicts of interest related to a company owned by his family.
EU (MNI BRIEF): EU finance ministers pushed back against Germany's call for a review of the bloc's fiscal rules to allow a long-term exemption for defence spending, stressing the continuing importance of fiscal sustainability and market credibility, Polish Finance Minister and the current EU chair of the ministers' meetings Andrzej Domanski said. The ECOFIN ministers had discussed a possible ten-year escape clause for defence today as well as the Commission's four-year approach, which exempts defence spending only for a period until it has reached a new, higher structural level of spending.
SPAIN (MNI BRIEF): The Bank of Spain has revised up its 2025 domestic inflation projection for the country to 2.5% (up from 2.1%) due to higher energy prices and has kept unchanged its projection for 2026 and 2027 with prices at 1.7% and 2.4%, respectively. The national bank has also revised growth up to 2.7% (0.2pp higher) for this year while also keeping it unchanged for the next two years at 1.9% and 1.7%. Internal demand boosted growth more than expected in Q4 2024 and Q1, but it should moderate in the coming quarters, the projections show.
OVERNIGHT DATA
MNI: US BLS: JOLTS OPENINGS 7.740M IN JAN; DEC REVISED TO 7.508M
US DATA: JOLTS Report Shows Labor Moderation Stalling After Large Rebalancing
The January JOLTS report saw higher than expected job openings whilst annual revisions have left a slightly weaker than first thought trend early in 2H24 before some recent firming. The quits rate increase was exaggerated by rounding but is nevertheless a rare second month with an unrounded increase although it’s too soon to materially show impact from DOGE pressure.
- Job openings were higher than expected in January at 7.74m (sa, cons 7.6m) after a downward revised 7.51m (initial 7.6m) in Dec.
- Ratio to unemployed: 1.13 after a downward revised 1.09 (initially 1.10) in Dec and 1.13 (initially 1.15) in Nov.
- This ratio continues to broadly stabilize, having averaged 1.1 since June, although the latest profile looks slightly more upward sloping than before today’s annual revisions: it has now averaged 1.06 in Jul-Sep before 1.11 in Oct-Jan. For context, it averaged 1.2 in 2019 and 1.0 in 2017-18.
- The 0.2pp increase in the quits rate was exaggerated by rounding (it lifted 0.10pps from 1.947% to 2.053%) but it’s still a second monthly increase on an unrounded basis after a prior steady trend decline and is the highest since May 2024.
- Federal government quit rates remained particularly low at 0.4% (within total government at 0.8%) but this lagged January data won’t show impact from DOGE pressure on federal government roles.
- The hire rates meanwhile continued to stabilize near recent lows, at 3.4% or 3.7% for the private sector, at levels comfortably below those in the build-up to the pandemic (all workers 3.9% 2019, 3.8% 2017-18).
US NFIB FEB SMALL BUSINESS INDEX 100.7
US DATA: Small Business Optimism Further Off Highs, Hawkish Price Details
- NFIB small business optimism eased again in February to 100.7 (cons 101.0) from 102.8 in Jan for a further retreat from the recent high of 105.1 in December.
- It’s come against a further increase in the uncertainty index to 104 for its second highest reading in the series history (highest being 110 in Oct ahead of the presidential election).
- That said, optimism is still elevated by recent standards, having averaged 91 through 2022-Oct 2024 and it’s still close to the 103 averaged in 2019 prior to the pandemic.
- The price components of the survey saw a hawkish tilt: the net share reporting price increases over past three months jumped from 22% to 32% (highest since May 2023) and the net share expecting to increase prices over the next three months rose from 26% to 29% (above 28% in Nov-Dec for highest since Mar 2024) - all seasonally adjusted figures.
- The latter is at a level that will continue to imply difficulty in fully returning to the 2% inflation target should historical relationships hold - see charts.
MNI: US REDBOOK: MAR STORE SALES +5.7% V YR AGO MO
US REDBOOK: STORE SALES +5.7% WK ENDED MAR 08 V YR AGO WK
US DATA: Redbook Retail Sales Remain Solid Into March
March month-to-date Johnson Redbook Retail Sales were up 5.7% Y/Y as of the March 8 week.
- As such the series continues to point to solid overall "official" retail sales going into March (the Redbook series represents 80% of the equivalent Census Bureau retail sales series) roughly consistent with the previous 9 months of nominal Y/Y retail sales in the "official" monthly series of between 2-4% and perhaps at the high end of that range for control group retail sales.
- February retail sales data is out March 17 (early consensus is for 0.8% M/M growth after January's 0.9% contraction).
- There is a note of caution noted in the Redbook report though with a later Easter in 2025 vs 2024 potentially distorting future ("retailers suggest averaging the sales comparisons from both months [March and April] to generate a combined growth rate"), while "retailers are closely monitoring a 40-day boycott of Target that began on March 5, a week-long boycott of Amazon that started on March 7, and a boycott of Nestlé scheduled to begin on March 21, among other actions."
US TSYS: Late Reversal Lower Ahead Of CPI
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).
The Jun 25 T-Note future is down 13/32 at 110-295, having traded in a range of 110-255 to 111-250.
Cash Tsy Yields
- The 2-Yr yield is up 5.4bps at 3.9369%
- The 5-Yr yield is up 6.3bps at 4.0295%
- The 10-Yr yield is up 6.5bps at 4.2779%
- The 30-Yr yield is up 5.5bps at 4.5958%
US 10YR FUTURE TECHS: (M5) Trend Structure Still Bullish
- RES 4: 113-05 2.0% 10-dma envelope
- RES 3: 112-13 1.500 proj of the Jan 13 - Feb 7 - Feb 12 price swing
- RES 2: 112-01/02 High Mar 4 / 1.382 proj of Jan 13-Feb 7-12 swing
- RES 1: 111-25 Intraday high
- PRICE: 111-10 @ 10:50 GMT Mar 11
- SUP 1: 110-12+/110-00 Low Mar 6 / High Feb 7
- SUP 2: 109-21 50-day EMA and a key near-term support
- SUP 3: 108-21 Low Feb 19
- SUP 4: 108-03+ Low Dec 12 and a bear trigger
The trend structure in Treasury futures is bullish. This is reinforced by moving average studies that remain in a bull-mode condition, highlighting an uptrend. The contract has recently pierced resistance at 111-22+, the Dec 3 ‘24 high. A clear breach of this level would strengthen a bullish theme and open 112-02 and 112-13, Fibonacci projection points. Firm support is at 110-00, the Feb 7 high.
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.
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
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).
| 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 |