EXECUTIVE SUMMARY
- MNI US FISCAL: Rising Expenditures Keep Budget Deficit Ballooning
- MNI US DATA: Broadening Inflation Depth In February
- MNI US DATA: Housing Inflation Confirms Recent Moderation To Pre-Pandemic Trends
- MNI US DATA: CPI Core & Supercore Latest Trends Still Hot
US
MNI US FISCAL: Rising Expenditures Keep Budget Deficit Ballooning
February's Federal budget balance came in almost exactly as expected at $307.0B ($308.0B survey), an increase from $296.3B in the same month of 2024. That brought the cumulative budget deficit through the first 5 months of the fiscal year (starting in Oct) to $1.147T - outpacing easily outpacing the previous year's total to this point of $828B, and exceeding even 2021's post-covid $1.05T for a new 5-month record.
- The wider February total is also despite a pickup in revenues ($296.4B vs $271.1B in Feb 2024), as expenditures maintained their strong recent record ($603.4B vs $567.4B in Feb 2024). February is seasonally one of if not the lowest revenue months of the year.
- Total receipts are up 1.9% Y/Y in the first 5 months of the current fiscal year compared with the same period a year earlier - but outlays are up 13.2% Y/Y.
- One of the categories causing expenditure to pick up is net interest, which came in at $74.2B, boosting the 12-month cumulative total to a fresh record $927B - roughly 3x the amount seen at the recent low in 2021.
- Absent a significant turnaround, the FY 2025 deficit is on pace to exceed the $1.9T projections made by the Congressional Budget Office's in mid-January, and the Office of Management and Budget's made in July 2024. Either way, it's set for an ex-Covid record.
NEWS
MNI BOC: Delivers Expected 25 BPS Trade-War Cut, Signals Cautious Path Forward
Bank of Canada cut interest rates for a seventh time in a row, by 25 bps to 2.75% in line with market expectations, amid concerns over U.S. trade war. "Looking ahead, the trade conflict with the United States can be expected to weigh on economic activity, while also increasing prices and inflation. Governing Council will proceed carefully with any further changes to our policy rate given the need to assess both the upward pressures on inflation from higher costs and the downward pressures from weaker demand, " Governor Macklem said.
MNI CANADA: RTRS-Gov't To Announce $28.9B In Retaliatory Tariffs Responding To Trump
Jarrett Renshaw at Reuters posts on X: "Canada will announce $29.8 billion in retaliatory tariffs this morning in response to Trump’s steel and aluminum tariffs, a Canadian source tells me." The US has imposed 25% tariffs on Canadian steel and aluminium imports as of midnight, although this is a step back from the 50% threatened by US President Donald Trump on 11 March. This in turn, came in response to Ontario Premier Doug Ford's plan for a 25% surcharge on electricity exports from the province that serve three US states along the border.
MNI US-RUSSIA: Ceasefire Is Up To Russia Now - Trump
Reuters reporting comments from US President Donald Trump, ahead of a bilateral meeting at the White House with Irish Taoiseach Micheál Martin, on the ceasefire framework agreed by Ukraine in Saudi Arabia yesterday. Trump also touches on tariffs, saying there will be "very little flexibility" when the tariffs are initially put in place. Trump echoes US Secretary of State Marco Rubio, who said yesterday the "ball is in [Russia's] court", saying: "It is up to Russia now... we have people going to Russia right now... hopefully we can get a ceasefire... have gotten some positive messages on ceasefire."
MNI IRELAND: Trump-Ireland Took Our Pharma & Other Companies Thru Taxation
Taoiseach (PM) Micheál Martin is meeting with US President Donald Trump in the Oval Office (live here). Trump says "Irish took our pharmaceutical and other companies away through taxation".
- Trump asked by Irish reporter about Irish "housing crisis". Trump says: "You know why there is a housing crisis. Because they are doing so well"."
- Trump: "The EU was set up in order to take advantage of the United States". Including Ireland, yes"
- Trump: 'Tax policy would stop Ireland from taking business'. Says there is still a "massive deficit" with Ireland and "We are going to even that out".
MNI UK: PM-Will Take 'Pragmatic' Approach To US Tariffs, 'All Options On Table'
Prime Minister Sir Keir Starmer has said that he is "disappointed to see global tariffs" on steel and aluminum from US President Donald Trump. Speaking at prime minister's questions, Starmer says, 'We will take a pragmatic approach... we're negotiating an economic deal... we will keep all options on the table'. In contrast to the EU, which imposed retaliatory countermeasures immediately following the US' imposition of its own tariffs, the UK has refrained from imposing its own trade levies in response to Trump's actions.
MNI US TSYS: Core & Supercore CPI Still Hot Despite Decline
- Treasuries look to finish moderately lower - well off early Wednesday's knee-jerk highs after headline CPI inflation data came out lower than expected (0.2% vs. 0.3% est, 0.5% prior).
- Focus quickly turned to Core & Supercore CPI - while lower than expected - remained hot: Core CPI surprisingly eased to 3.12% Y/Y in February (cons 3.2) from what had been a surprisingly strong 3.26% in January.
- Supercore (core services ex-housing) inflation pulled back more than expected on the month although as noted above it was dragged lower by softer than expected airfares and vehicle insurance (for which PPI and not CPI feeds into PCE).
- Tsy June'25 10Y climbed to 111-07 high briefly but retreated to 110-15.5 low in the minutes after CPI, the 10Y contract looks to finish at 110-20.5 (-6.5), above initial technical support at 110-12+/110-00 (Low Mar 6 / High Feb 7).
- Projected rate cuts through mid-2025 continue to recede vs. early morning levels (*) as follows: Mar'25 at -0.2bp (-1bp), May'25 at -8.6bp (-9.4bp), Jun'25 at -24.6bp (-26bp), Jul'25 at -35.2bp (-37.5bp).
- Cross asset: Bbg US$ index whip-sawed post data, finish mildly high at 1266.24 (+.79) vs. 1269.25 post-data high; Crude prices gain (WTI +1.42 at 67.67, Gold higher +15.60 at 2931.50.
OVERNIGHT DATA
MNI US DATA: Broadening Inflation Depth In February
- MNI calculations suggest that 34% of the overall CPI basket increased at 3% Y/Y or higher in February, compared to 30% in January for the highest share since May 2024.
- It pushes it away from the 24% averaged in 2019 and 19% through 2015-19, with that historical wedge still firmly driven by services.
- Details suggest February’s uptick is a reasonably broad move. The same share specifically for core goods increased from 13% to 19% (highest since Apr 2024), whilst core services increased from 55% to 63% (highest since Nov 2024).
- These are volatile metrics, especially for core services recently, but they’re reasonable increases ahead of tariff implementation. Closer to 35% of the core services basket was running at or faster than 3% Y/Y in the years leading up to the pandemic.
- See the below charts for clearer context:
MNI US DATA: CPI Core & Supercore Latest Trends Still Hot
- Core CPI surprisingly eased to 3.12% Y/Y in February (cons 3.2) from what had been a surprisingly strong 3.26% in January. Within the seasonally adjusted data, both three- and six-month run rates are still running hotter though, at 3.6% annualized.
- Supercore (core services ex-housing) inflation pulled back more than expected on the month although as noted above it was dragged lower by softer than expected airfares and vehicle insurance (for which PPI and not CPI feeds into PCE).
- Supercore run rates are still robust despite easing in the latest month, at 4.8% annualized over three months and 4.5% over six months, but there has been a large wedge with PCE supercore which stood at 3.3% annualized over six months back in January.
Core CPI (SA)
- % M/M: 0.227 in Feb'25 after 0.446 in Jan'25
- % 3mth ar: 3.6 in Feb'25 after 3.9 in Jan'25
- % 6mth ar: 3.6 in Feb'25 after 3.7 in Jan'25
CPI Core Services Non-Housing (SA)
- % M/M: 0.215 in Feb'25 after 0.757 in Jan'25
- % 3mth ar: 4.8 in Feb'25 after 5.4 in Jan'25
- % 6mth ar: 4.5 in Feb'25 after 4.7 in Jan'25
MNI US DATA: Core PCE Details Not Necessarily As Benign
With PCE using airfares and car insurance from the PPI report rather than the CPI report, it isn't quite as benign an inflation print as suggested on the surface, at least from the perspective of the Fed's preferred PCE price gauge.
- More mixed than airfares/insurance in CPI are parts of some key PCE inflation components including healthcare services that draw in part from the CPI report, including dental services (stronger, at -0.1% after -0.6%) and hospital services (weaker, at 0.1% from 0.9% prior).
- Overall the weightings and contributing categories from CPI suggest that core PCE will tilt more closely to 0.3% than to 0.2% (consensus coming into CPI was 0.24%), but we await PPI for the details including volatile categories that have no equivalent in CPI such as portfolio management.
MNI US DATA: Housing Inflation Confirms Recent Moderation To Pre-Pandemic Trends
- The main rental inflation metrics were very close to expectations in February, with both OER and primary rents at 0.28% M/M vs average analyst estimates of 0.30%.
- The weighted average of these two series has in turn averaged 0.29% M/M for four months now, back to the 0.28% averaged in 2019 and 0.27% over a longer period of 2017-19.
MNI US DATA: A Little Further Traction From Lower Mortgage Rates
- MBA composite mortgage applications increased another 11% sa last week after 20% the week prior. Refis are leading the increase (16% after 37%) but new purchase applications have also firmed (7% after 9%).
- It comes with a further modest decline in the 30Y conforming mortgage rate to 6.67%, -6bps after -15bps the week prior, for its lowest since early December having peaked recently at 7.09% in early January.
- The level of refi applications is at its highest since Sept/Oct 2024 when they spiked after expectations of a deeper Fed cutting cycle, but are still only 52% of 2019 averages.
- New purchase applications meanwhile are only their highest since late January and at 60% of 2019 averages.
- Recall that President Trump emphasized his desire for lower borrowing costs in last week’s address to Congress, saying he wants to “bring down mortgage rates” and celebrating the “big beautiful drop” in “interest rates”.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 82.55 points (-0.2%) at 41402.61
S&P E-Mini Future up 24 points (0.43%) at 5614
Nasdaq up 212.4 points (1.2%) at 17690.88
US 10-Yr yield is up 3.6 bps at 4.3163%
US Jun 10-Yr futures are down 5.5/32 at 110-21.5
EURUSD down 0.0028 (-0.26%) at 1.0908
USDJPY up 0.52 (0.35%) at 148.3
WTI Crude Oil (front-month) up $1.46 (2.2%) at $67.65
Gold is up $16.08 (0.55%) at $2934.23
European bourses closing levels:
EuroStoxx 50 up 49.52 points (0.93%) at 5359.42
FTSE 100 up 44.98 points (0.53%) at 8540.97
German DAX up 347.64 points (1.56%) at 22676.41
French CAC 40 up 47.05 points (0.59%) at 7988.96
US TREASURY FUTURES CLOSE
3M10Y +2.202, 0.771 (L: -6.387 / H: 1.541)
2Y10Y -1.105, 32.153 (L: 31.159 / H: 34.91)
2Y30Y -0.588, 64.17 (L: 62.216 / H: 68.989)
5Y30Y +0.101, 55.937 (L: 49.78 / H: 57.565)
Current futures levels:
Jun 2-Yr futures down 3.5/32 at 103-15.125 (L: 103-14.25 / H: 103-21)
Jun 5-Yr futures down 5/32 at 107-24 (L: 107-20.5 / H: 108-04.75)
Jun 10-Yr futures down 5.5/32 at 110-21.5 (L: 110-15.5 / H: 111-07)
Jun 30-Yr futures down 15/32 at 116-15 (L: 116-12 / H: 117-14)
Jun Ultra futures down 20/32 at 121-22 (L: 121-18 / H: 122-31)
MNI 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 High Mar 11
- PRICE: 111-36 @ 10:26 GMT Mar 12
- SUP 1: 110-12+/110-00 Low Mar 6 / High Feb 7
- SUP 2: 109-28 50-day EMA and a key near-term support
- SUP 3: 109-13+ Low Feb 24
- SUP 4: 108-21 Low Feb 19
The trend structure in Treasury futures is unchanged, it remains bullish. This is reinforced by moving average studies that remain in a bull-mode condition, highlighting a dominant 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 to watch is at 110-00, the Feb 7 high.
SOFR FUTURES CLOSE
Mar 25 -0.008 at 95.703
Jun 25 -0.050 at 95.940
Sep 25 -0.060 at 96.185
Dec 25 -0.065 at 96.325
Red Pack (Mar 26-Dec 26) -0.07 to -0.055
Green Pack (Mar 27-Dec 27) -0.045 to -0.03
Blue Pack (Mar 28-Dec 28) -0.03 to -0.025
Gold Pack (Mar 29-Dec 29) -0.03 to -0.025
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00430 to 4.32050 (-0.00171/wk)
- 3M -0.00821 to 4.28877 (-0.00359/wk)
- 6M -0.01713 to 4.16088 (-0.02279/wk)
- 12M -0.02310 to 3.95263 (-0.04670/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.32% (-0.01), volume: $2.502T
- Broad General Collateral Rate (BGCR): 4.31% (-0.01), volume: $971B
- Tri-Party General Collateral Rate (TCR): 4.31% (-0.01), volume: $947B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $97B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $282B
FED Reverse Repo Operation
RRP usage recedes to $131.055B this afternoon from $137.310B Tuesday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 35.
MNI PIPELINE: Corporate Bond Roundup: $10.3B to Price Wednesday
At least $10.3B in corporate bonds to price Wednesday, OMERS Finance and World Bank rolled to Thursday's order of business
- Date $MM Issuer (Priced *, Launch #)
- 03/12 $2.25B #Stellantis $500M 3Y +140, $750M 5Y +170, $1B 10Y +215
- 03/12 $2.2B #Amcor Flexibles NA $725M 3Y +83, $725M 5Y +103, $750M 10Y +125
- 03/12 $1.5B #SoCal Edison $850M 5Y +118, $650M 30Y +160
- 03/12 $1.25B #NetApp Inc $625M 7Y +130, $625M 10Y +140
- 03/12 $1.2B #Canadian Pacific Railway $600M 5Y +75, $600M 10Y +95
- 03/12 $650M #CGI Inc 5Y +100
- 03/12 $500M #Equitable Holdings WNG 30NC10 6.7%
- 03/12 $750M PBF Holding 5NC2
- 03/12 $Benchmark AES 7Y +175a
- Expected Thursday:
- 03/13 $1B OMERS Finance 5Y SOFR+69a
- 03/13 $Benchmark World Bank 5Y SOFR+44a
MNI BONDS: EGBs-GILTS CASH CLOSE: Bunds Outperform Gilts, GGBs Lag
Long-end core EGBs outperformed UK counterparts Wednesday, while Greek instruments underperformed peers.
- Global core FI rallied briefly after US CPI came in below-expectations, but the move quickly reversed as the details proved less benign - and Bund and Gilt yields would subsequently hit session highs.
- But they strengthened over the early afternoon as equities pulled back from a nascent rally earlier in the session, with continued concerns over US tariffs/growth weighing.
- Gilts lagged the afternoon rally, leading to underperformance vs Bunds. Both the UK and German curves flattened, with the latter twist flattening.
- Periphery EGBs were mixed, with GGB spreads widening after a surprise Greek dual-tranche syndication announcement.
- In data, the ECB's forward-looking wage tracker saw a small uptick for Q4 2025 negotiated wages (ex one-off payments).
- Thursday's European schedule includes Eurozone industrial production and Italian labour market data, while we hear from several ECB speakers including Rehn, Holzmann, Villeroy and Nagel.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2.6bps at 2.225%, 5-Yr is up 0.3bps at 2.522%, 10-Yr is down 2bps at 2.877%, and 30-Yr is down 2.1bps at 3.166%.
- UK: The 2-Yr yield is up 5.2bps at 4.225%, 5-Yr is up 4.9bps at 4.338%, 10-Yr is up 4.8bps at 4.722%, and 30-Yr is up 4.3bps at 5.326%.
- Italian BTP spread down 0.1bps at 111.6bps Greek up 1.5bps at 81.9bps
MNI FOREX: US CPI Prompts Short-Term Volatility, Daily Adjustments Contained
- Lower-than-expected US inflation data prints prompted an initial bout of US dollar weakness on Wednesday, with the USD index registering session lows in the immediate aftermath. However, this proved to be short-lived, as feedthrough to the Fed’s preferred PCE reading was seemingly less dovish than the headline readings, and the DXY took little time to fully reverse to the day’s strongest levels.
- A subsequent third swing lower for the greenback leaves the DXY close to unchanged levels as we approach the APAC crossover, with a lot of the action remaining in the equity space as the e-mini S&P 500 future posts a punchy 2.2% daily range.
- The main FX action was in USDJPY, which exhibited a 100 pip range within the short post-data timeframe, initially falling to 148.20 before surging to a high of 149.19, briefly extending the bounce from yesterday’s lows to 1.8%. Technically, a bear cycle remains in play for USDJPY, and that latest recovery appears corrective in nature. Spot has subsequently turned lower, and key short-term resistance remains unchanged further out at 151.30, Mar 3 high.
- A much more contained session for EURUSD, with the pair failing to punch above yesterday’s peak of 1.0947. It is worth noting the pair has completed its recovery to the US election related highs at 1.0937, with the bounce from last week’s lows totalling 5.55%. Given the severity of the moves and technicals now indicating an overbought condition, the potential for a pullback may be growing.
- The Canadian dollar is among the best performers in G10, following the Bank of Canada’s well forecast 25bp cut. The BOC said dangers from a U.S. trade war led it to cut borrowing costs for a seventh consecutive meeting, and expressed caution about further moves as the immediate hit to growth may be followed by unwelcome inflation. USDCAD is down 0.35% at 1.4380 and support to watch lies at 1.4242, the Mar 6 low.
- US PPI and jobless claims headline the economic calendar on Thursday.
THURSDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 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 |