MNI ASIA OPEN: CPI Steals Show, No React March Minutes

US

INTERVIEW (MNI): 'Nothing Good' In CPI - Ex-Fed Board's Kamin: The Federal Reserve will be even less inclined to cut interest rates soon after the latest inflation data showed a third month of firmer-than-expected readings that included broad-based gains, former Fed board economist Steven Kamin told MNI.

• “There’s nothing in those numbers that can save the prospect of a June cut. No matter which way you slice the data, there’s nothing good there,” he said, citing a third month of 0.4% monthly gains in core CPI.
• Upside risks to inflation will remain prevalent in FOMC members’ minds after the new batch of numbers indicated that the stalling of disinflation from the start of this year is persisting, he said.

BOC (MNI): Text Of BOC Press Conference Opening Statement: Today, we maintained our policy interest rate at 5%. We are also continuing our policy of quantitative tightening. We have three main messages this morning.

• First, monetary policy is working. Total consumer price index (CPI) and core inflation have eased further in recent months, and we expect inflation to continue to move closer to the 2% target this year.
• Second, growth in the economy looks to be picking up. We expect GDP growth to be solid this year and to strengthen further in 2025.
• Third, as we consider how much longer to hold the policy rate at the current level, we’re looking for evidence that the recent further easing in underlying inflation will be sustained.

NEWS

BOC WATCH (MNI): Macklem Sees Conditions For Rate Cut Emerging: Bank of Canada Governor Tiff Macklem said he's seeing progress on conditions needed to lower interest rates and needs proof price stability is being restored while holding the key borrowing cost at 5% for a sixth consecutive meeting Wednesday.

SECURITY (MNI): Iranian Attack On Israel "Imminent": Bloomberg reporting that the US and allies believe, "major missile or drone strikes by Iran or its proxies against military and government targets in Israel are imminent," in retaliation for an Israeli airstrike on an Iranian diplomatic compound in Damascus on April 1. The airstrike killed Mohammad Reza Zahedi, a high ranking IRGC officer widely believed to be involved in Hezbollah's military leadership.

CHINA-EU (MNI): Scholz To Hold Talks w/Xi 16 Apr As EU Warns Of Clean Tech Gulf: The dates for Chancellor Olaf Scholz's upcoming multi-day visit to China have been confirmed, with the German leader flying into Chongqing on 14 April, onto Shanghai on 15 April, and then meetings with President Xi Jinping and then Premier Li Qiang on Tuesday 16 April.

SOUTH KOREA (MNI): Opposition Bloc Could Cross 200 Seat Threshold-Exit Polls: Exit polls from the South Korean legislative election show that the opposition may be able to cross the 200-seat threshold in the National Assembly.

SOUTH KOREA (MNI): Yoon Looking At 'Lame Duck' Period As Exit Polls Point At Big Loss: With exit polls from various outlets published following the conclusion of voting in the South Korean parliamentary election, President Yoon Suk-yeol faces the remainder of his term in a 'lame duck' position with the opposition liberal Democratic Party of Korea (DPK) and its allies looking at a landslide win.

US TSYS CPI Inflation Data Weighs Heavily on Tsys, Rate Cut Pricing Evaporates

• Treasury futures gapped lower after this morning's higher than expected CPI inflation data kicked the day off: MoM (0.4% vs. 0.3% est), YoY (3.5% vs. 3.4% est); CPI Ex Food and Energy MoM (0.4% vs. 0.3% est), YoY (3.8% vs. 3.7% est).
• Jun'24 10Y futures fell to 108-05.5 low after a poorly received 10Y auction re-open tailed 3.3bp (largest since Dec'22: 4.560% high yield vs. 4.527% WI; bid-to-cover falls to 2.34x vs. 2.51x prior).
• Treasury futures drifting near late session lows, little reaction to March FOMC minutes where majority favor cutting QT pace by half "soon": Jun'24 10Y at 108-08.5 (-112) vs. 108-05.5 low, 10Y yield 4.5497% +.1880 vs. 4.5660% high. Curves still flatter but off lows: 2s10s -3.391 at -41.697, 5s30s inverted briefly is flatter by -10.082 at 2.015.
• Projected rate cut pricing remains well off morning levels: May 2024 at -2.6% vs. -4.7% earlier w/ cumulative -.6bp at 5.322%; June 2024 at -17.2% vs -55.1% earlier w/ cumulative rate cut -5bp vs -14.9bp at 5.279%. July'24 cumulative at -12.1bp vs. -24.4bp, Sep'24 cumulative -22.7bp vs. -41.2bp.
• Treasury futures briefly bounced off post auction lows after Bbg headline: "US SEES MISSILE STRIKE ON ISRAEL BY IRAN, PROXIES AS IMMINENT". Carry-over from late last Thursday when Tsys surged on heavy risk-off support on rumors that Iran would retaliate soon for an Israeli strike on an Iranian consulate in Syria earlier in the week.

OVERNIGHT DATA

US DATA (MNI): Dispersion Metrics Show Narrowing In Breadth Of M/M Price Pressures: Dispersion metrics showed a narrowing in the breadth of price pressures in March, not too surprising with supercore strength concentrated in a few items.

• Again, they can be noisy from month-to-month but our estimated share of the CPI basket growing faster than 3% annualized on the month was 46% (from 53% in Feb and 58% in Jan, vs 2019 av 42%) whilst the share >5% fell to 33% (from 44% and 49% in Jan, vs 2019 av 25%).
• Similarly, the share seeing outright deflation on the month increased from 33% to 42% (2019 av 38%).
• This is based on a narrow basket covering 57 items taken predominantly at index level 4.
• Separately, a more granular look across 192 items showed a stalling in the share of items seeing inflation faster than 3% Y/Y at 38%. This measure averaged 24% in 2019 and ~20% in 2015-19.

• Core CPI (SA)
  • % M/M: 0.36 in Mar'24 after 0.36 in Feb'24
  • % 3mth ar: 4.5 in Mar'24 after 4.2 in Feb'24
  • % 6mth ar: 3.9 in Mar'24 after 3.9 in Feb'24
• Supercore CPI (SA)
  • % M/M: 0.65 in Mar'24 after 0.47 in Feb'24
  • % 3mth ar: 8.2 in Mar'24 after 6.9 in Feb'24
  • % 6mth ar: 6.1 in Mar'24 after 5.9 in Feb'24

US DATA (MNI): MBA Mortgage Applications Flat On Conflicting Forces: MBA composite mortgage applications increased marginally last week (0.1%) after -0.6%, with a return to conflicting forces, this time from declining purchase applications (-4.7%) and higher refis (+9.9%).

• Purchases are at 54% of 2019 levels vs 29% for refis.
• The 30Y conforming rate increased 10bps to 7.01%, back just above 7% having seen similar levels in late Feb/early Mar and before that December.
• However, the conforming-jumbo spread has pulled back from recent lows of -21bps and is back to -12bps, a mild relative easing.

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA down 438.79 points (-1.13%) at 38445.96
• S&P E-Mini Future down 52.75 points (-1%) at 5207.5
• Nasdaq down 148.8 points (-0.9%) at 16157.95
• US 10-Yr yield is up 19.2 bps at 4.5537%
• US Jun 10-Yr futures are down 44.5/32 at 108-8
• EURUSD down 0.0115 (-1.06%) at 1.0742
• USDJPY up 1.18 (0.78%) at 152.94
• WTI Crude Oil (front-month) up $1.02 (1.2%) at $86.25
• Gold is down $23.53 (-1%) at $2329.27
• European bourses closing levels:
• EuroStoxx 50 up 9.93 points (0.2%) at 5000.83
• FTSE 100 up 26.42 points (0.33%) at 7961.21
• German DAX up 20.61 points (0.11%) at 18097.3
• French CAC 40 down 3.79 points (-0.05%) at 8045.38

US TREASURY FUTURES CLOSE

• 3M10Y +14.908, -86.804 (L: -106.33 / H: -84.683)
• 2Y10Y -2.991, -41.297 (L: -46.975 / H: -35.948)
• 2Y30Y -8.798, -33.63 (L: -40.16 / H: -22.525)
• 5Y30Y -10.035, 2.062 (L: -1.017 / H: 13.119)
• Current futures levels:
• Jun 2-Yr futures down 14.25/32 at 101-17.25 (L: 101-16 / H: 102-01.125)
• Jun 5-Yr futures down 1-00.75/32 at 105-7.75 (L: 105-06 / H: 106-12.5)
• Jun 10-Yr futures down 1-12.5/32 at 108-8 (L: 108-05.5 / H: 109-26.5)
• Jun 30-Yr futures down 2-11/32 at 115-20 (L: 115-13 / H: 118-10)
• Jun Ultra futures down 2-27/32 at 122-23 (L: 122-15 / H: 125-30)

US 10Y FUTURE TECHS: (M4) Impulsive Sell-Off

• RES 4: 111-10+ High Mar 13
• RES 3: 110-21/31+ 50-day EMA / High Mar 27 and key resistance
• RES 2: 110-06 High Apr 4
• RES 1: 109-26+ Intraday high
• PRICE: 108-08 @ 1440 ET Apr 10
• SUP 1: 108-06+ 2.236 proj of Dec 27 - Jan 19 - Feb 1 price swing
• SUP 2: 108-05.5 Intraday low
• SUP 3: 108-00 Round number support
• SUP 4: 107-07+ 76.4% of the Oct - Dec ‘23 bull leg (cont)

A sharp sell-off in Treasuries today reinforces the current bearish cycle and confirms a resumption of this year’s downtrend. The contract has traded through the 109-00 handle and breached 108-25, the 2.00 projection of Dec 27 - Jan 19 - Feb 1 price swing. This opens 108-06+ next, the 2.236 projection. Initial resistance has been defined at 109-26+, today’s intraday high. Key short-term resistance is at 110-06, the Apr 4 high.

SOFR FUTURES CLOSE

• Jun 24 -0.115 at 94.720
• Sep 24 -0.205 at 94.870
• Dec 24 -0.255 at 95.075
• Mar 25 -0.290 at 95.265
• Red Pack (Jun 25-Mar 26) -0.30 to -0.285
• Green Pack (Jun 26-Mar 27) -0.28 to -0.23
• Blue Pack (Jun 27-Mar 28) -0.21 to -0.165
• Gold Pack (Jun 28-Mar 29) -0.16 to -0.15

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00170 to 5.31895 (+0.00049/wk)
• 3M -0.00694 to 5.29892 (+0.00553/wk)
• 6M -0.01793 to 5.23137 (+0.01103/wk)
• 12M -0.02609 to 5.06156 (+0.03049/Wk)

• Secured Overnight Financing Rate (SOFR): 5.31% (+0.00), volume: $1.826T
• Broad General Collateral Rate (BGCR): 5.31% (+0.00), volume: $714B
• Tri-Party General Collateral Rate (TGCR): 5.31% (+0.00), volume: $705B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $82B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $245B

FED Reverse Repo Operation

• RRP usage climbs to $445.816B vs $441.792B on Tuesday. Compares to mid-March low of $413.877B - the lowest level since May 2021.
• Meanwhile, the latest number of counterparties at 67 vs. 73 yesterday, near April 4 2+ year low of 66.

PIPELINE $500M Engie Chile 10Y Launched

• Date $MM Issuer (Priced *, Launch #)
• 4/10 $1.5B *Rentenbank 5Y SOFR+35
• 4/10 $1B *FHLB 3Y Global +7
• 4/10 $500M #Engie Chile 10Y +225a
• 4/10 $Benchmark Blue Owl Finance investor calls

EGBs-GILTS CASH CLOSE: US CPI Bear Flattens UK And German Curves

Core European FI sold off sharply Wednesday after a third successive stronger-than-expected US inflation report.

• The UK and German curves bear flattened with notable sell-offs in the short-end/belly as near-term rate cuts were priced out. Gilts underperformed Bunds.
• Thursday's highlight is the ECB meeting - while there is no expectation of a shift in policy, communications pointing to a June cut will be closely eyed, especially as US inflation data appears to be pushing that prospect further away for the Fed.
• Just 79bp of 2024 ECB rate cuts remain priced (10bp less than pre-release), with June no longer a "sure thing" (around 84% vs nearly 100% earlier this week).
• The BoE equivalent rose 9bp post CPI but that move continued into the close, with just 57bp of 2024 reductions now priced in 2024 - vs 73bp prior.
• 2Y UK yields quickly rose nearly 8bp on the CPI data, with the selloff continuing into the close with a 14bp rise on the day.
• While periphery EGB spreads initially widened on the CPI release, they recovered as equities bounce and closed tighter to Bunds.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 7.8bps at 2.966%, 5-Yr is up 7.6bps at 2.461%, 10-Yr is up 6.4bps at 2.435%, and 30-Yr is up 3.9bps at 2.555%.
• UK: The 2-Yr yield is up 14.2bps at 4.347%, 5-Yr is up 14.3bps at 4.052%, 10-Yr is up 11.9bps at 4.148%, and 30-Yr is up 9.2bps at 4.62%.
• Italian BTP spread down 0.8bps at 137.2bps / Spanish down 0.4bps at 80.8bps

FOREX Greenback Soars On Hot Inflation Data, Sharp AUDUSD Reversal Lower

• Higher-than-expected US CPI figures sparked a fresh bout of USD strength, largely reflective of the 20bp move higher for the front-end of the treasury curve. Notably, USDJPY breached the 152.00 level and saw solid follow through above the crucial resistance, although rising fears of any Japanese intervention may be limiting the momentum of the move, with the pair currently up 0.75% at typing.
• EURUSD slumped 1.14% to 1.0740 and in the process has cleared initial support at 1.0791, the Apr 5 low. The break lower reinstates a short-term bearish threat and signals the end of the recent recovery between Apr 2 - 9. Short-term focus turns to 1.0725, the Apr 2 low, ahead of the key support at 1.0695, the Feb 14 low and bear trigger.
• With tomorrow’s ECB decision and press conference, it is worth highlighting some elevated levels of FX option expiries, notably $1.0700(E2.0bln) and $1.0800-15(E5.7bln).
• Other G10 currencies have experienced even sharper weakness against the dollar amid more pessimistic risk sentiment across global markets. This dynamic weighed heavily on antipodeans with AUDUSD sinking 1.90% and has erased the majority of the past week’s gains in the process.
• The sharp AUDUSD sell-off signals the end of the recent climb and reinstates a bearish threat. A continuation lower would signal scope for a test of support at 0.6478, the Mar 5 low. Clearance of this level would expose the bear trigger at 0.6443, the Feb 13 low.
• On Thursday, the ECB decision will be in focus. Given the lack of material new information since the last policy meeting, and with the ECB previously steering markets towards a rate cut in June, policy will remain on hold at the April meeting. In the US, key PCE components have raised the stakes for tomorrow's PPI, due at 1330BST/0830ET.

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
11/04/2024	0130/0930	***		CN	CPI
11/04/2024	0130/0930	***		CN	Producer Price Index
11/04/2024	0600/0800	**		NO	Norway GDP
11/04/2024	0800/1000	*		IT	Industrial Production
11/04/2024	1215/1415	***		EU	ECB Deposit Rate
11/04/2024	1215/1415	***		EU	ECB Main Refi Rate
11/04/2024	1215/1415	***		EU	ECB Marginal Lending Rate
11/04/2024	1230/0830	***		US	Jobless Claims
11/04/2024	1230/0830	**		US	WASDE Weekly Import/Export
11/04/2024	1230/0830	***		US	PPI
11/04/2024	1245/1445			EU	ECB Monetary Policy Press Conference
11/04/2024	1245/0845			US	New York Fed's John Williams
11/04/2024	1400/1000			US	Richmond Fed's Tom Barkin
11/04/2024	1430/1030	**		US	Natural Gas Stocks
11/04/2024	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
11/04/2024	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
11/04/2024	1600/1200	***		US	USDA Crop Estimates - WASDE
11/04/2024	1600/1200			US	Boston Fed's Susan Collins
11/04/2024	1630/1730			UK	BOE's Greene at Delphi Economic Forum on Greece
11/04/2024	1700/1300	***		US	US Treasury Auction Result for 30 Year Bond