EXECUTIVE SUMMARY
- MNI: Canada's Carney To Take On Trump, Be Fiscally Cautious - Ministers
- U.S., China Discuss a Trump-Xi Summit for June (WSJ)
- MNI BOC WATCH: Seventh Rate Cut Expected Amid US Trade War
- MNI: US Feb Inflation Expectations Uncertainty Rises - NY Fed
- MNI POLITICAL RISK: Talks Likely To Continue On German Debt Brake Reform Despite Green Opposition
US TSYS: Equity Rout Sparks Safe Haven Rally
The short-end led a Treasury rally Monday, mirroring a sharp drop in equities.
- Concerns over a US economic slowdown/recession were evident in what was shaping up as the sharpest drop in equities in over 2 years at one point, with S&P and Nasdaq futures off over 3% each late and cyclical stocks bearing the brunt (tech -4.5%, consumer discretionary -4.1%).
- Yields bounced off the lows alongside a late pickup in equities, but curves still managed to close sharply bull steeper with 2Y yields posting their 2nd biggest daily fall of the year to the lowest since October.
- Futures markets added about half a 25bp rate cut to the Fed easing path through end-2025, with at least 3 cuts now firmly expected (the first by June).
- The 2-Yr yield is down 9.6bps at 3.904%, 5-Yr is down 10bps at 3.9858%, 10-Yr is down 7.7bps at 4.2245%, and 30-Yr is down 4.7bps at 4.5508%.
- Jun 10-Yr futures (TY) up 21/32 at 111-7.5 (L: 110-22.5 / H: 111-13.5)
- Data was thin: the NY Fed's February consumer expectations survey showed an uptick in 1Y and 3Y inflation views to multi-month highs, but not in nearly as dramatic a shift as the latest UMich consumer surveys.
- Tuesday's key release is January JOLTS job openings, with February CPI the week's highlight Wednesday (analyst unrounded expectations center on a deceleration in core PCE to 0.27% M/M from 0.45% in January - MNI's preview will be out Tuesday).
NEWS
US (MNI): U.S. consumers' uncertainty about inflation rose in February as median inflation expectations rose a tenth to 3.1% at the year-ahead horizon and were unchanged at the three-year-ahead and five-year-ahead horizons at 3.0%, according to a monthly New York Fed survey. Survey respondents' uncertainty regarding future inflation outcomes increased at all three horizons. Median home price growth expectations increased by 0.1ppt to 3.3% and year-ahead commodity price expectations increased for all commodities. Median expected price growth for gas increased by 1.1ppts to 3.7%, and 0.5ppt for food to 5.1%, its highest level since May 2024.
US/CHINA (WSJ): Washington and Beijing have begun discussions about a potential "birthday summit" in June in the U.S. between President Trump and Chinese leader Xi Jinping, according to people familiar with the matter. The discussions, which the people say are in the early stages, come as the Trump administration is ramping up tariff and other trade measures against China. This strategy aims to build leverage for negotiations with Beijing.
CANADA (MNI): Incoming Canadian Prime Minister Mark Carney has a clear mandate to stand on his credentials as former BOC and BOE Governor to take a tough stand against Donald Trump's tariffs while being cautious about further deficit outlays to protect the economy, cabinet ministers told MNI. "We need to be able to fight back,” Patty Hajdu, the minister in charge of economic development in the timber and mineral region of Northern Ontario, told MNI at the Liberal leadership convention Sunday. “We are getting a new leader precisely when we need to.”
BANK OF CANADA (MNI BOC WATCH): Canada's central bank is seen lowering interest rates for a seventh consecutive meeting Wednesday as U.S. tariff hikes damage exports and investment, overwhelming domestic momentum from past cuts. Eighteen economists surveyed by MNI see a quarter-point cut to 2.75% in the decision due at 9:45am EST, well ahead of the four who expect a pause. Several shops switched their call to a reduction in the last week as Donald Trump said he intends to set a 25% tariff on most imports from Canada in coming weeks.
GERMANY (MNI POLITICAL RISK): The announcement from the environmentalist Greens that they do not support plans from the centre-right Christian Democratic Union (CDU) and the centre-left Social Democrats for a multi-billion euro infrastructure fund and the proposed loosening of the federal debt brake to allow for greater defence spending could pose a significant threat to the incoming gov'ts plans to bolster national and European security and upgrade Germany's crumbling public infrastructure network. The Greens, which are set to sit in opposition in the new Bundestag, have said that they oppose the plans and accuse the CDU and SPD of looking to use the funds as a "treasure chest" to enact their election promises. Outgoing Vice Chancellor Robert Habeck, who ran as the Greens' chancellor candidate in the February federal election, called his party's stance 'logical', and accused the CDU and SPD of acting "as if there were no tomorrow. They don't care about the future, climate protection, or intergenerational justice, but only about election gifts for their clientele."
EU (MNI BRIEF): Brussels is sticking with its proposal for a four-year time-limited exemption for defence spending from EU deficit and limits despite a German push for more time, a Commission spokesperson said Monday. "The reason why is because it's incredibly important to combine fiscal leeway in a responsible fashion with fiscal discipline," Balazs Ujvari said, adding it is "the fundamental reason why we are focused on a four-year period."
CHINA(MNI INTERVIEW): The island province of Hainan plans to launch China's largest free-trade port this year despite rising U.S. trade tensions, with officials expecting the island’s green development credentials will attract European companies, a senior provincial official told MNI on the side lines of this year’s National People’s Congress.
OVERNIGHT DATA
US DATA: NY Fed Survey Shows Consumer Inflation Expectations Edging Up
The NY Fed's February Survey of Consumer Expectations showed a modest but noteworthy uptick in inflation expectations through a 3-year horizon, with medium/longer-term expectations overall steady.
- The 1Y median expectation picked up to 3.13% (from 3.00% in the prior 2 months), with 3Y up 0.01pp to 3.00%. The 5Y median dipped 0.02pp to 2.98% from January's 8-month high. Survey respondents' uncertainty regarding future inflation outcomes increased at all three horizons.
- While the levels of inflation expectations stand in significant contrast to the latest University of Michigan surveys (1Y hitting 4.3% in Feb, up from 2.8% at end-2024, with 5-10 up to 3.5% from 3.0% at end-2024), the direction across consumer surveys is clear: the NY Fed 1Y median was a 9-month high, and 3Y at 15-month high (albeit both quite marginally and the latter only on an unrounded basis).
- Some FOMC members have specifically cited a rise in UMichigan inflation as a potential sign that expectations are becoming unanchored, but that survey has its flaws, and the NY Fed's survey is considered to have a more robust methodology.
- But while government policy shifts including tariffs and economic developments may not necessarily be causing a surge in inflation expectations, it is also unmistakable that expectations have bottomed - and at levels that may not provide significant comfort for policymakers.
MARKETS SNAPSHOT
Below gives key levels of markets in afternoon NY trade:
- DJIA down 794.71 points (-1.86%) at 41978.22
- S&P E-Mini Future down 141.5 points (-2.45%) at 5630.25
- Nasdaq down 669.4 points (-3.7%) at 17507.76
- US 10-Yr yield is down 7.9 bps at 4.2226%
- US Jun 10-Yr futures (TY) are up 21.5/32 at 111-8
- EURUSD down 0.0008 (-0.07%) at 1.0826
- USDJPY down 0.61 (-0.41%) at 147.41
- WTI Crude Oil (front-month) down $1.02 (-1.52%) at $66.02
- Gold is down $20.13 (-0.69%) at $2889.71
Prior European bourses closing levels:
- EuroStoxx 50 down 81.43 points (-1.49%) at 5386.98
- FTSE 100 down 79.66 points (-0.92%) at 8600.22
- German DAX down 387.99 points (-1.69%) at 22620.95
- French CAC 40 down 73.2 points (-0.9%) at 8047.6
US TREASURY FUTURES CLOSE
Current futures levels:
Jun 2-Yr futures (TU) up 6/32 at 103-20.875 (L: 103-15.5 / H: 103-22.5)
Jun 5-Yr futures (FV) up 15.25/32 at 108-4.25 (L: 107-23.8 / H: 108-8)
Jun 10-Yr futures (TY) up 21.5/32 at 111-08 (L: 110-22.5 / H: 111-13.5)
Jun 30-Yr futures (US) up 35/32 at 117-24 (L: 116-29 / H: 118-07)
Jun Ultra futures (WN) up 41/32 at 123-11 (L: 122-12 / H: 124-03)
US 10YR FUTURE TECHS: (M5) Trend Structure Remains Bullish
- RES 4: 113-00+ 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: 111-15 High Mar 5
- PRICE: 111-06 @ 17:28 GMT Mar 10
- 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 condition in Treasury futures is still bullish, confirming the slippage off last week’s highs as corrective. 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. Note that the daily trend condition is overbought, a pullback has allowed the overbought set-up to unwind. Firm support is at 110-00, the Feb 7 high.
STIR: End-2025 Implied Fed Rates Set For 4+ Month Low Close
Futures markets have added about a half a cumulative 25bp rate cut to the Fed's easing path through the end of the year as equities are set to post their worst session in over 2 years.
- The end-2025 futures-implied rate is down a little more than 12bp to 3.50%, which would be the lowest at the close since October 24, implying 83bp of cuts.
- While a cut next week is still not seen as realistic (under 5% implied probability), a cut by May is better than 50/50 with a full cut priced no later than June.
| Meeting | Current FF Implieds (%), LH | Cumulative Change From Current Rate (bp) | Incremental Chg (bp) | Prior Session (Mar 07) | Chg Since Then (bp) |
| Mar 19 2025 | 4.32 | -1.2 | -1.2 | 4.32 | -0.5 |
| May 07 2025 | 4.20 | -13.5 | -12.3 | 4.23 | -3.7 |
| Jun 18 2025 | 4.00 | -33.1 | -19.6 | 4.08 | -7.6 |
| Jul 30 2025 | 3.88 | -45.5 | -12.4 | 3.96 | -8.3 |
| Sep 17 2025 | 3.71 | -62.4 | -16.9 | 3.80 | -9.8 |
| Oct 29 2025 | 3.61 | -71.8 | -9.4 | 3.72 | -11.1 |
| Dec 10 2025 | 3.50 | -82.6 | -9.8 | 3.63 | -11.2 |
| Jan 28 2026 | 3.48 | -85.3 | -3.7 | 3.60 | -12.1 |
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
US TSYS/OVERNIGHT REPO: SOFR Steady In Range, Could Drift Lower
Secured rates softened slightly Friday, with SOFR dipping 1bp to 4.34% per NY Fed data.
- SOFR's been steady in the 4.33-4.35% area in March, following the usual month-end dynamics in late-February (4.39% Feb 28th).
- Secured rates are generally expected to drift lower, with key dates to watch on Tuesday 11th (cash returning to market due to bill redemptions which should help the downward drift in rates) and Monday 17th (mid-month coupon Treasury auction settlements which could put upward pressure on rates).
- Effective Fed Funds were steady once again at 4.33%.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.34%, -0.01%, $2477B
* Broad General Collateral Rate (BGCR): 4.33%, -0.01%, $959B
* Tri-Party General Collateral Rate (TGCR): 4.33%, -0.01%, $940B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $110B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $284B
US TSYS/OVERNIGHT REPO: ON RRP Takeup Remains Close To 2025 Average
Takeup of the Fed's Overnight Reverse Repo facility fell $7.3B to $129.1B Monday, slightly more than reversing Friday's $7B rise.
- This leaves the level at 5-session lows, but at fairly typical levels for the year so far (average: $132B in 2025).
- ON RRP takeup could rise Tuesday in line with the Treasury bill paydowns that we flagged in our earlier SOFR note.
| SOFR FIX - Source BBG/CME | ||
| 1M | 4.32537 | 0.00316 |
| 3M | 4.29875 | 0.00639 |
| 6M | 4.18496 | 0.00129 |
| 12M | 3.99367 | -0.00566 |
US SOFR/TREASURY OPTION SUMMARY
Monday's US rates/bond options flow included:
- TYJ5 108.50 puts paper paid 0-02 on 30K.
- Weekly TY options 110.00/109.75 put spread 9K blocked at 0-03, looks like a buyer of the put spread, this expires on Friday. Covered via 540 TYM5 futures at 110-25+.
BONDS: EGBs-GILTS CASH CLOSE: Bunds Outperform As Fiscal Uncertainty Lingers
Core European curves twist steepened Monday, with short-end instruments strengthening to start the week.
- Bunds largely held on to morning gains triggered by a broader risk-off move, as US economic concerns lingered, while uncertainty over German fiscal negotiations remained a prominent theme (Bunds jumped after the Green Party said they wouldn't support the current fiscal expansion proposal).
- UK instruments benefited too but traded with little clear direction through most of the session, sagging toward the cash close.
- Even so, central bank easing expectations were little changed (end-2025 ECB steady at 44bp of further cuts, BOE 57bp, up by 1bp).
- In data, German industrial production was a little stronger than expected while the trade surplus slipped in January, but this wasn't a market mover.
- Bunds outperformed Gilts on the day. Periphery / semi-core EGB spreads were mixed, with Spain outperforming and Italy underperforming.
- Tuesday's calendar is relatively thin (Dutch final Feb inflation, ECB Rehn speech), with more attention on events later in the week including the ECB conference and US CPI data on Wednesday.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 3.1bps at 2.216%, 5-Yr is down 2.5bps at 2.491%, 10-Yr is down 0.3bps at 2.833%, and 30-Yr is up 0.7bps at 3.121%.
- UK: The 2-Yr yield is down 0.8bps at 4.195%, 5-Yr is up 0.3bps at 4.285%, 10-Yr is up 0.6bps at 4.644%, and 30-Yr is up 1.9bps at 5.226%.
- Italian BTP spread up 1bps at 113.2bps / Spanish down 0.8bps at 65.3bps
FOREX: CAD/JPY Slippage Follows Equities Lower Still
- Equity selling remained the dominant theme Monday, with markets happy to press global equity markets again to lower levels. At the midpoint of US trade, the S&P 500 shed close to 2.5%, with tech and growth-led names still the underperformers. The NASDAQ Comp dropped to 17,500 - further into correction territory and through to new multi-month lows.
- Weakness across CAD today (triggered partly by softer oil prices, but also by slipping global equities and tariff risk) is keeping the currency at the softer end of the G10 table, while solid JPY trade is pressuring CAD/JPY toward key support.
- Today's 101.68 low coincides with key support of Y101.67 - the mid-2024 pullback low prompted by the BoJ's JPY-buying intervention last year. Clearance here would be resolutely bearish for the cross, opening levels last seen in 2023 and leaving the next key support at Y100 psychologically, and Y99.93, the 76.4% retracement for the upleg posted off the 2023 low.
- The clear downward near-term momentum in the cross follows the Rengo pay tally from last week - underlining pay demands at their highest level in over 30 years for the 2025 Shunto round. While the March BoJ decision sees only an outside of a rate hike - but the May 1st meeting could be more consequential, for which the decision could be contingent on the Tankan survey on April 1, reports from the Bank's branch managers' meeting on April 7, the updated Rengo tally in April, and CPI.
- NOKSEK has rallied through the course of the morning, with the stronger-than-expected Norwegian February inflation report driving a sharp repricing in front-end NOK rates. 2-year NOK swap rates (vs 3m NIBOR) are ~20bps higher today at 4.34%, while 2-year SEK rates are down 1bp. NOKSEK traded higher by as much as 1.5% Monday, narrowing the gap to resistance at 0.9517, the 20-day EMA.
- JOLTs jobs data is among the Tuesday highlights, particularly as markets look for higher quality information on the state of the US labour market after last Friday's NFP print. The Fed remain inside their pre-meeting media blackout period, leaving an appearance from ECB's Rehn the sole CB appearance Tuesday.
DATA/EVENTS CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 11/03/2025 | 2330/0830 | ** |  JP | Household spending |
| 11/03/2025 | 2350/0850 | *** | JP | GDP |
| 11/03/2025 | 0001/0001 | * |  GB | BRC-KPMG Shop Sales Monitor |
| 11/03/2025 | 1000/0600 | ** |  US | NFIB Small Business Optimism Index |
| 11/03/2025 | - | *** |  CN | New Loans |
| 11/03/2025 | - | *** | CN | Money Supply |
| 11/03/2025 | - | *** | CN | Social Financing |
| 11/03/2025 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 11/03/2025 | 1400/1000 | *** | US | JOLTS jobs opening level |
| 11/03/2025 | 1400/1000 | *** | US | JOLTS quits Rate |
| 11/03/2025 | 1600/1200 | *** | US | USDA Crop Estimates - WASDE |
| 11/03/2025 | 1700/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 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 | 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 |