EXECUTIVE SUMMARY
- MNI: Fed SEP To Show 2 Or Fewer Cuts, Two-Sided Economy Risks
- MNI POLITICAL RISK - Trump Tees Up Call With Vladimir Putin
- MNI US DATA: Empire Mfg Survey Displays Further Signs Of Tariffs Disruption
- MNI US DATA: Control Group Jumps But Overall Retail Momentum Still Slowing
US
MNI: Fed SEP To Show 2 Or Fewer Cuts, Two-Sided Economy Risks
Federal Reserve officials are seeing increased risks to both the inflation and employment sides of their mandate, likely leading them to pencil in just two rate cuts or fewer for 2025 this week while revising up their forecast for price pressures and curtailing growth expectations, ex-policymakers and staffers told MNI. "I can imagine because of uncertainty and some tariff-driven upside inflation risk that a certain number of people shift to fewer than two cuts and some of the doves shift to two," said Dennis Lockhart, former president of the Atlanta Fed. "It could be an increase in the number of dots at two, but I can also see a scenario where two cuts and one are evenly split."
NEWS
MNI POLITICAL RISK - Trump Tees Up Call With Vladimir Putin
President Donald Trump will today tour the John F. Kennedy Center for the Performing Arts in Washington D.C. The Trump administration’s economic policy will come under more scrutiny this week with retail jobs data today and the Federal Open Market Committee holding its second meeting of 2025 on Wednesday. Trump administration officials are outwardly maintaining short-term economic shock is not a concern despite surveys showing Americans increasingly disapprove of Trump’s handling of the economy and tariffs. Treasury Secretary Scott Bessent said he's "not worried about markets" noting that stock market corrections are "healthy" and "normal".
MNI SECURITY: Trump Threatens Consequences For Iran If Houthi Attacks Continue
US President Donald Trump has threatened consequences for Iran if the Houthi rebels in Yemen retaliate to a campaign of US airstrikes that started on Saturday. US officials have warned that the strikes will continue until the group ceases military action against Red Sea shipping. Trump said on Truth Social: "Let nobody be fooled! The hundreds of attacks being made by Houthi,... all emanate from, and are created by, IRAN. Any further attack or retaliation by the “Houthis” will be met with great force, and there is no guarantee that that force will stop there."
MNI GERMANY: Opponents Issue New Legal Challenges, But Debt Brake Reform Set To Pass
The far-right Alternative for Germany (AfD) has launched a last-minute attempt to have the Constitutional Court bar the holding of a vote in the old Bundestag on 18 March that is set to reform the debt brake to allow for greater defence spending and create an E500B infrastructure fund. The AfD argues that not enough time has been afforded to allow external experts to scrutinise the plans. On 16 March the Bundestag budget committee approved the holding of a full vote on the package.
MNI US TSYS: Curves Twist Flatter Ahead Wednesday's FOMC Policy Annc
- Treasury futures looked to finish Monday's session mixed, well off midday highs, curves flatter (2s10s -4.117 at 25.178) with 2s through 10s trading progressively weaker after a rocky start. Treasuries extended early morning highs then lows after this morning's lower than expected Retail Sales and down-revision to prior - while ex-auto/gas and the Control Group comes out steady to higher than expected; sharp decline in Empire Manufacturing.
- Headline advance retail sales were much weaker than expected in February at 0.2% M/M (0.6% expected, -1.2% prior rev from -0.9%), but this was offset by strong performances in core categories. But the control group sales rose 1.0% vs the 0.4% expected, more than offsetting the downward revision to Jan (-1.0% vs -0.8% prelim).
- Headline manufacturing index slipped -20 (cons -2) in March from +5.7. It’s the lowest since Jan 2024 having been at its strongest reading since a particularly strong 20.2 in Nov and before that Apr 2023.
- Rates hit session highs after headlines aired where Pres Trump warned retaliation against Iran for any Houthi attacks.
- The Mar'25 10Y currently trades 110-18.5 (-2) vs. 110-14 low/110-30 high - still inside initial technical levels: resistance above at 111-25 (Mar 11 high), support below at 110-12.5/110-00 (Low Mar 6 & 13 / High Feb 7). Tsy 10Y yield 4.3043% last.
- Cross asset update: Bbg US$ index off lows (BBDXY -3.44 at 1262.27), Gold attempting to rise above 3,000 again (+15.15 at 2999.31), West Texas Crude mildly higher +0.39 at 67.57.
- Focus remains on Wednesday's FPMC policy annc
OVERNIGHT DATA
MNI US DATA: Control Group Jumps But Overall Retail Momentum Still Slowing
Headline advance retail sales were much weaker than expected in February at 0.2% M/M (0.6% expected, -1.2% prior rev from -0.9%), but this was offset by strong performances in core categories. Ex-auto/gas rose 0.5% (vs 0.4% expected, with the "beat" more than offset by a downward revision to prior at -0.8% vs -0.5% prelim). But control group sales rose 1.0% vs the 0.4% expected, more than offsetting the downward revision to Jan (-1.0% vs -0.8% prelim).
- The control group reading - which is an input into GDP - was a 5-month high.
- The reason for the discrepancy between the fairly soft headline growth and the very strong control is that the latter excludes gasoline (-1.0%, weakest in 5 months, after +1.3%) and food services which unrounded was the weakest in 24 months (-1.54% after flat in Jan). That said, control group sales also exclude categories that rebounded if only to soft rates of growth: auto dealers (-0.6% after -3.8%) and building materials (+0.2%, strongest in 5 months, after -1.9%, which was the worst in 12 months).
- Bigger-picture, retail sales continue to slow: the 3M/3M annualized rate fell to 2.3% for headline (7-month low), with control group - which is a good gauge for PCE goods consumption in GDP - at 2.6% (11-month low). Ex-autos/gas 3M/3M annualized was a 56-month weakest 0.5% - the lowest since June 2020 (ie pandemic).
- This is starting to show in the Y/Y rates total at 3.1% Y/Y (4-month low), ex-autos/gas at 3.5% (6-month low), though control group picked up to 4.4% from 3.7%.
MNI US DATA: Empire Mfg Survey Displays Further Signs Of Tariffs Disruption
The Empire State manufacturing survey had all the hallmarks of tariffs disruption in the first regional Fed mfg survey for March, with orders slipping and input price inflation at its fastest in more than two years.
- The headline manufacturing index slipped -20 (cons -2) in March from +5.7. It’s the lowest since Jan 2024 having been at its strongest reading since a particularly strong 20.2 in Nov and before that Apr 2023.
- New orders played a prominent role in latest weakness, sliding from +11.4 to -14.9, just below the -14.7 in Oct for technically the lowest since Apr 2024 and before that May 2023.
- Remember that it’s a particularly volatile survey more broadly, characterized by a monthly change standard deviation of 17pts - see the chart below for a comparison with the average regional Fed survey and ISM manufacturing.
- That said, the six month ahead measure for general business conditions has tended to be somewhat smoother and this saw another heavy decline to +12.7 for its lowest since May 2023.
- Employment dipped a little further, with -4.1 after -3.6, although that’s only the lowest since December.
- On the price side, prices paid increased further to 44.9 from 40.2 for now the highest since Feb 2023 and this continued to feed through to prices received, at 22.4 after 19.6 for the highest since May 2023.
MNI US DATA: Rising Costs And Uncertainty Hurt Homebuilder Sentiment
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell to a joint 15-month low in March at 39, vs expectations it would remain steady at 42, in another piece of "soft" data that suggests tariffs and other policy shifts - plus uncertainty itself - are having a net stagflationary effect at least in the short term.
- "Present sales" fell 3 points to 43, a 15-month low and the second straight sharp decline since the recent peak of 50 in January, while prospective buyer traffic dropped 5 points to 24, a joint 16-month low and also down sharply from the post-election peak 32. While "future sales" were steady at 47, that was still a joint 9-month low.
- And sentiment fell across all 4 U.S. regions for a 2nd consecutive month.
- The main culprit was rising prices, per the report's authors: “Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages" though "builders are starting to see relief on the regulatory front to bend the rising cost curve". And "construction firms are facing added cost pressures from tariffs" with "data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Uncertainty on policy is also having a negative impact on home buyers and development decisions.”
- The renewed softness in sentiment suggests that the ongoing rebound ing residential construction is likely to be subdued.
MNI CANADA DATA: Home Sales Drop In Feb As Trade War Dents Consumer Confidence
- Feb home sales -9.8% MOM, biggest decline since May 2022, Canadian Real Estate Association says Monday.
- Number of sales was also the lowest since Nov 2023. That's even after the BOC's rate cuts began in June.
- "Declines were broad-based, with sales falling in about three-quarters of all local markets and in almost all large markets" led by the region around Toronto.
- “The uncertainty of the last few weeks seems to be causing some buyers to think twice about big financial decisions right now,” said James Mabey, CREA Chair.
- CREA's home price index that aims to match up sales of similar homes -0.8% MOM, the largest month-over-month decrease since Dec 2023. The average sale price fell 3.3% from a year ago to CAD668,097.
- One other potential source of weakness is federal government's recent immigration curbs.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 467.21 points (1.13%) at 41955
S&P E-Mini Future up 59 points (1.04%) at 5751.25
Nasdaq up 137.1 points (0.8%) at 17891.4
US 10-Yr yield is down 0.6 bps at 4.3062%
US Jun 10-Yr futures are down 2/32 at 110-18.5
EURUSD up 0.0042 (0.39%) at 1.0921
USDJPY up 0.59 (0.4%) at 149.24
WTI Crude Oil (front-month) up $0.37 (0.55%) at $67.55
Gold is up $14.1 (0.47%) at $2998.29
European bourses closing levels:
EuroStoxx 50 up 41.37 points (0.77%) at 5445.55
FTSE 100 up 47.96 points (0.56%) at 8680.29
German DAX up 167.75 points (0.73%) at 23154.57
French CAC 40 up 45.7 points (0.57%) at 8073.98
US TREAURY FUTURES CLOSE
3M10Y -0.793, 0.733 (L: -5.032 / H: 2.592)
2Y10Y -4.555, 24.74 (L: 24.462 / H: 28.997)
2Y30Y -6.096, 54.08 (L: 53.966 / H: 59.967)
5Y30Y -3.284, 49.798 (L: 49.573 / H: 53.33)
Current futures levels:
Jun 2-Yr futures down 2.625/32 at 103-10.75 (L: 103-10.37 / H: 103-14.75)
Jun 5-Yr futures down 3.25/32 at 107-19 (L: 107-16 / H: 107-27)
Jun 10-Yr futures down 2/32 at 110-18.5 (L: 110-14 / H: 110-30)
Jun 30-Yr futures up 6/32 at 116-30 (L: 116-19 / H: 117-20)
Jun Ultra futures up 11/32 at 122-15 (L: 121-29 / H: 123-11)
MNI US 10YR FUTURE TECHS: (M5) Support Remains Intact
- RES 4: 113-04+ 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: 110-26 @ 1340 ET Mar 17
- SUP 1: 110-12+/110-00 Low Mar 6 & 13 / High Feb 7
- SUP 2: 109-31+ 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 condition in Treasury futures remains bullish and the current consolidation marks a pause in the uptrend. A bull theme is reinforced by MA studies that are in a bull-mode condition, highlighting a dominant uptrend and positive market sentiment. Recent gains have resulted in a print above 111-22+, the Dec 3 ‘24 high. A clear breach of this level would open 112-02 and 112-13, Fibonacci projections. Firm support is 110-00, the Feb 7 high.
SOFR FUTURES CLOSE
Mar 25 -0.015 at 95.685
Jun 25 -0.050 at 95.880
Sep 25 -0.060 at 96.085
Dec 25 -0.050 at 96.230
Red Pack (Mar 26-Dec 26) -0.045 to -0.025
Green Pack (Mar 27-Dec 27) -0.025 to -0.015
Blue Pack (Mar 28-Dec 28) -0.01 to steady
Gold Pack (Mar 29-Dec 29) +0.005 to +0.015
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00038 to 4.31678 (-0.00897 total last wk)
- 3M +0.00024 to 4.29529 (-0.00370 total last wk)
- 6M +0.00143 to 4.19980 (+0.01341 total last wk)
- 12M +0.01314 to 4.03098 (+0.02417 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.30% (+0.00), volume: $2.441T
- Broad General Collateral Rate (BGCR): 4.29% (+0.00), volume: $953B
- Tri-Party General Collateral Rate (TCR): 4.29% (+0.00), volume: $933B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $104B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $277B
FED Reverse Repo Operation
RRP usage retreats well below $100B to $89.496B this afternoon from $126.234B Friday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 25 from 29 prior.
MNI PIPELINE: Corporate Bond Update: $1.8B Oncor 3Pt Launched
- Date $MM Issuer (Priced *, Launch #)
- 03/17 $1.8B #Oncor $500M 2Y +45, $650M 10Y +105, $650M 30Y +120
- 03/17 $Benchmark BMW US Capital 2Y +65a, 2Y SOFR+78a, 3Y +75a, 3Y SOFR+92a, 5Y +97a, 10Y +115a
- 03/17 $Benchmark Public Service Co of Colorado 10Y +108, 30Y +125
- 03/17 $Benchmark Santander 4NC3 +145, 4NC3 SOFR, 6NC5 +165
- 03/17 $Benchmark Republic Services 5Y +73, 10Y +93
- 03/17 $Benchmark Hyatt 3Y +105, 7Y +155
- Rolled to Tuesday's session:
- 03/18 $Benchmark ADB 10Y SOFR+60a
MNI FOREX: NZDUSD Surges 1.2% to Fresh 2025 Highs
- Firmer risk sentiment on Monday has allowed the higher beta currencies to outperform in the G10 FX space. Added to this, weaker details within the US retail sales report has bolstered the softer dollar theme, allowing AUDUSD and NZDUSD to register gains of 0.93% and 1.22% respectively,
- Topside momentum for NZD has been exacerbated by the earlier breach of the 2025 highs, which has seen NZDUSD rise back above 0.5800 for the first time since mid-December. Furthermore, the solid bounce for equities is underpinning a strong move higher for NZDJPY, likely bolstering the renewed Kiwi optimism. This is the first time the cross has been above its 50-day EMA since January, having built a solid base in the low 83.00s earlier this month.
- The broad dollar offer has also assisted GBPUSD to print a fresh four-month high as the pair edges ever closer to the psychological 1.3000 mark. A close at current levels would be the highest daily close since the US election and should keep attention firmly on the November 06 high of 1.3048.
- In similar vein, EURUSD rose as high as 1.0929 as markets await tomorrow's special session in the Bundestag. Optimism over the German debt deal have been inspiring the optimism for the single currency, and the gap has been narrowing to the recovery highs of 1.0947. This level will need to be cleared before the market turns its focus to pivot resistance at 1.10 and a more notable cluster of medium-term resistance around the 1.12 mark.
- A relatively subdued session for USDJPY still saw an 80 pip range for the pair. Post data action saw an initial dip lower to 148.31 before being swiftly faded as markets latched on to the stronger-than-expected control group reading. Overnight session highs at 149.10 have capped the upside so far, and initial resistance comes in just above at 149.46, the 20-day EMA.
- German ZEW and Canadian CPI highlight Tuesday’s calendar, before the focus turns to major central bank decisions starting Wednesday.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 18/03/2025 | 0930/0930 |  GB | Consumer Price inflation weight update | |
| 18/03/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 18/03/2025 | 1000/1100 | * |  EU | Trade Balance |
| 18/03/2025 | 1000/1100 | *** |  DE | ZEW Current Expectations Index |
| 18/03/2025 | - |  US | FOMC Meetings with S.E.P. | |
| 18/03/2025 | 1230/0830 | *** |  CA | CPI |
| 18/03/2025 | 1230/0830 | *** | US | Housing Starts |
| 18/03/2025 | 1230/0830 | ** | US | Import/Export Price Index |
| 18/03/2025 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 18/03/2025 | 1315/0915 | *** | US | Industrial Production |
| 18/03/2025 | 1530/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 18/03/2025 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 19/03/2025 | 2350/0850 | ** |  JP | Trade |
| 19/03/2025 | 2350/0850 | * | JP | Machinery orders |
| 19/03/2025 | 0001/0001 | * | GB | Brightmine pay deals for whole economy |
| 19/03/2025 | 0300/1200 | *** | JP | BOJ Policy Rate Announcement |
| 19/03/2025 | 0430/1330 | ** | JP | Industrial Production |