EXECUTIVE SUMMARY
- MNI BRIEF: BOC Says Recession Is Possible In Deep Trade War
- MNI CANADA DATA: Small Business Confidence Craters On US Trade War Concerns
- MNI US DATA: Jobless Claims Tick Up, But Little Evidence Of Soaring Gov't Layoffs
- MNI US DATA: Philly Fed Manufacturing Continues To Retrench As Prices Paid Soar
- MNI US DATA: Existing Home Sales Pick Up In February, But Still At Depressed Levels
NEWS
MNI BRIEF: BOC Says Recession Is Possible In Deep Trade War
Bank of Canada Governor Tiff Macklem said Thursday an intense tariff war makes a recession possible but there's a wide range of scenarios, some of his most candid comments to date about the strongest tensions between two of the world's largest trade partners since the 1930s. “If you get broad based tariffs for a long time, yes, that could very well lead to a recession,” he told reporters in Calgary, Alberta. There are more favorable situations where uncertainty is reduced or tariffs removed and “I don’t think we’ll have a recession in that scenario” he said.
MNI GERMANY: Bundesrat Set To Sign Off On Debt Brake Reform Tomorrow
The Bundesrat (Federal Council), sometimes described as the upper house of the German parliament, is set to vote on the reform to the constitutional debt brake and formation of an E500B infrastructure fund tomorrow (21 March). The reforms were passed by the required two-thirds majority in the Bundestag earlier this week and will require the same majority in the Bundesrat.
MNI US-RUSSIA: Russia's Shoigu Confirms US Invited To Security Conference
Sergei Shoigu, Secretary of Russian Security Council and former defence minister, has confirmed to state-run TASS that the United States will be invited to attend an international security conference in Moscow running 27-29 May. Shoigu claims "representatives from more than 100 countries have already confirmed their participation in the upcoming meeting". Shoigu's comments come as another overture towards the United States as both sides seek to display improving bilateral relations following the call between Presidents Vladimir Putin and Donald Trump earlier this week.
MNI EUROPEAN COUNCIL: 26 Ldrs Back Statement On Ukraine Territorial Integrity
EU leaders are meeting in Brussels currently, with the levels of support the Union can afford to give to Ukraine (both in the financial and political sense), and the EU's plans to bolster its own defence and defence industry the main subjects of discussion. So far there has been little in the way of concrete progress on either front. Conclusions will not be published until the end of the meeting and there is the likelihood of talks dragging late into the night on Thursday and into Friday.
MNI US TSYS: Firmer/Near Lows, Curves Manage to Bull Steepen off Lows
- Still bid after the bell, Treasury futures look to finish near late Thursday session lows. Rates reversed early morning support after much stronger than expected Existing Home Sales for February, rising to 4.26mln on a seasonally-adjusted annual basis from 4.09mln in January - versus expectations of a decline to 3.95mln.
- Prior to that, Initial jobless claims came in at 223k in the Mar 15 week - which is the reference period for March's nonfarm payrolls report - basically matching the 224k expected (221k prior was rev from 220k). Continuing claims registered 1,892k in the Mar 8 week, a touch softer vs the 1,887k expected though more than offset by a downward revision to the prior week.
- Treasury had extended overnight highs - carry-over support after Wednesday's post-FOMC rally, while weaker European equities spilled over to US stocks, contributing to the move. Brief dip in Tsys overnight as EGBs lagged core peers on incoming supply before the weaker equities spurred risk off bid.
- Curves managed to bull steepen off lows, 2s10s +1.335 at 27.559, 5s30s +1.532 at 54.364. Projected rate cuts through mid-2025 recede from this morning's highs (*) as follows: May'25 at -4.5bp (-5.8bp), Jun'25 at -20.1bp (-21.7bp), Jul'25 at -30.7bp (-31.5bp), Sep'25 -46.9bp (-48.3bp).
OVERNIGHHT DATA
MNI US DATA: Jobless Claims Tick Up, But Little Evidence Of Soaring Gov't Layoffs
Initial jobless claims came in at 223k in the Mar 15 week - which is the reference period for March's nonfarm payrolls report - basically matching the 224k expected (221k prior was rev from 220k). Continuing claims registered 1,892k in the Mar 8 week, a touch softer vs the 1,887k expected though more than offset by a downward revision to the prior week (1,859k prior k rev from 1,870k).
- The 227k 4-week moving average in initial claims has been steadily moving up since mid-February, by 1k per week over the last 4 weeks, suggesting that the labor market, while softening somewhat, is not rapidly weakening. And continuing claims continues its pattern of falling one week before rising the next, with the latest week's reading consistent with recent ranges.
- There was nothing out of the ordinary in the aggregate national seasonal patterns (NSA initial -7.5k, continuing -24k), and no evidence of federal layoffs having an outsized impact. Washington, D.C. area initial claims (Maryland, Virginia and DC) registered 6.7k, still elevated but down from 8.6k the week prior. These are non-seasonally adjusted but direction of travel is not far out of the ordinary (see chart).
- Federal Employees (UCFE) initial claims actually fell by 514 in the Mar 8 week to 1,066, which compares to a 365 rise in the same week the year prior, bringing this series back from 2 weeks of 3-year highs (peaking at 1,634k in the Feb 22 week).
MNI US DATA: Existing Home Sales Pick Up In February, But Still At Depressed Levels
Existing home sales were much stronger than expected in February, rising to 4.26mln on a seasonally-adjusted annual basis from 4.09mln in January - versus expectations of a decline to 3.95mln. That was a little above the 4.09mln 2-year average, though within the ranges of the last 6 months. The underlying data showed a more mixed picture. Sales were driven by a 4.4% M/M rise in the South and a 13.3% rise in the West (both rebounding strongly from a weak January), while Northeast activity continued to sag (-2% M/M) and those in the Midwest flat. Inventory remained low but still higher than recent lows (3.5 months of sales for a 2nd consecutive month, up from 3.2 in December). Median prices (which are not seasonally adjusted) were $398.4k, up 3.8% Y/Y, but the slowest pace in 5 months.
MNI US DATA: Philly Fed Manufacturing Continues To Retrench As Prices Paid Soar
The Philadelphia Fed's Manufacturing Business Outlook Survey General Business Conditions index fell 5.6 points to 12.5 (9.0 expected, 18.1 prior), pulling back for a second month after soaring to start the year. Expectations for 6 months ahead fell 22.2 points to a 14-month low 5.6 - compared to 53.9 in November. Both readings suggest that optimism following last November's election has more than reversed amid tariff imposition and uncertainty, with activity looking increasingly weak even as price pressures are mounting.
MNI CANADA DATA: Small Business Confidence Craters On US Trade War Concerns
The Canadian Federation of Independent Business (CFIB) Business Barometer fell to 25.0 in March from 49.8 prior (rev from 49.5), suggesting by far the weakest small business confidence in a series that goes back to 2000. Unsurprisingly, with a survey conducted between March 5-7 as the US-Canada trade war flared, the report noted "Tariffs, counter-tariffs and threats of additional tariffs are taking a significant toll on business optimism".
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 34.32 points (-0.08%) at 41931.6
S&P E-Mini Future down 20.5 points (-0.36%) at 5710.5
Nasdaq down 87.7 points (-0.5%) at 17665.37
US 10-Yr yield is down 1.4 bps at 4.2293%
US Jun 10-Yr futures are up 5.5/32 at 111-5.5
EURUSD down 0.0051 (-0.47%) at 1.0852
USDJPY up 0.09 (0.06%) at 148.78
WTI Crude Oil (front-month) up $1.1 (1.64%) at $68.26
Gold is down $2.2 (-0.07%) at $3045.52
European bourses closing levels:
EuroStoxx 50 down 56.43 points (-1.02%) at 5450.93
FTSE 100 down 4.67 points (-0.05%) at 8701.99
German DAX down 288.91 points (-1.24%) at 22999.15
French CAC 40 down 77.27 points (-0.95%) at 8094.2
US TREASURY FUTURES CLOSE
3M10Y -0.711, -6.889 (L: -12.415 / H: -5.168)
2Y10Y +1.201, 27.425 (L: 24.072 / H: 27.788)
2Y30Y +2.549, 59.762 (L: 54.535 / H: 59.933)
5Y30Y +1.935, 54.767 (L: 50.998 / H: 54.811)
Current futures levels:
Jun 2-Yr futures up 1.625/32 at 103-17.25 (L: 103-14.75 / H: 103-19.375)
Jun 5-Yr futures up 3.25/32 at 108-0.75 (L: 107-28.25 / H: 108-08)
Jun 10-Yr futures up 6/32 at 111-6 (L: 111-00.5 / H: 111-17.5)
Jun 30-Yr futures up 9/32 at 117-25 (L: 117-19 / H: 118-23)
Jun Ultra futures up 9/32 at 123-13 (L: 123-07 / H: 124-23)
MNI US 10YR FUTURE TECHS: (M5) Trend Needle Points North
- RES 4: 113-01 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: 111-06+ @ 1258 ET Mar 20
- SUP 1: 110-17 20-day EMA
- SUP 2: 110-12+ Low Mar 6 & 13
- SUP 3: 110-02+/00 50-day EMA / High Feb 7 and a key support
- SUP 4: 109-13+ Low Feb 24
The trend condition in Treasury futures is bullish and the recent sideways price action appears to be a pause in the uptrend. Moving average studies are in a bull-mode condition and this reinforces a bullish theme. 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 at 110-00, Feb 7 high.
SOFR FUTURES CLOSE
Mar 25 +0.003 at 95.690
Jun 25 +0.030 at 95.910
Sep 25 +0.040 at 96.155
Dec 25 +0.040 at 96.335
Red Pack (Mar 26-Dec 26) +0.030 to +0.040
Green Pack (Mar 27-Dec 27) +0.025 to +0.030
Blue Pack (Mar 28-Dec 28) +0.030 to +0.035
Gold Pack (Mar 29-Dec 29) +0.035 to +0.040
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00290 to 4.31919 (+0.00279/wk)
- 3M -0.00254 to 4.30284 (+0.00779/wk)
- 6M +0.00216 to 4.23523 (+0.03686/wk)
- 12M +0.00382 to 4.08889 (+0.07105/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.29% (-0.02), volume: $2.376T
- Broad General Collateral Rate (BGCR): 4.28% (-0.02), volume: $943B
- Tri-Party General Collateral Rate (TCR): 4.28% (-0.02), volume: $920B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $106B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $285B
FED Reverse Repo Operation
RRP usage recedes slightly to $192.640B this afternoon from $193.378B Wednesday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties steady at 47.
MNI PIPELINE: Corporate Bond Update: $2.25B Citigroup Launched
- Date $MM Issuer (Priced *, Launch #)
- 03/20 $2.25B #Citigroup 11NC10 +110
- 03/20 $1.75B XPLR Infrastructure 5.75NC2.5 8.5%a, 8NC3 8.75%a
- 03/20 $1B #Target 10Y +80
- 03/20 $800M #Aviation Capital $300M 2Y +85, $500M 5Y +125
- 03/20 $750M #NiSource 30Y +130
- 03/20 $750M Sunoco 8.25NC3.25 6.375%a
- 03/20 $650M #Element Fleet 5Y +103
- 03/20 $500M *Alabama Power 10Y +88
- 03/20 $600M Capstone Copper 8NC3 6.875%
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Bunds As BoE Vote Leans Hawkish
Gilts underperformed Bunds Thursday, with periphery EGB spreads widening.
- Core FI strengthened in the early morning European session as equities pulled back following the overnight post-Federal Reserve gains.
- But gains had reversed by early afternoon, alongside a bounce in US equities (which was not shared by European stocks).
- The BoE decision came in on the hawkish side with an 8-1 vote in favour of holding rates (vs a cut), compared to the 7-2 expected (Mann moved to vote for no change after calling for a 50bp cut last time out). Mixed UK labour market data brought little reaction.
- Both the UK and German curves bear flattened. A widening of periphery/semi-core EGB spreads in the morning was sustained through the session, with European equities likewise failing to regain ground. GGBs underperformed.
- Friday's schedule includes UK public sector finance and Eurozone consumer confidence data, with an appearance by ECB's Escriva.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 2.5bps at 2.171%, 5-Yr is down 2.9bps at 2.436%, 10-Yr is down 2.4bps at 2.78%, and 30-Yr is up 0.4bps at 3.094%.
- UK: The 2-Yr yield is up 3.3bps at 4.239%, 5-Yr is up 2bps at 4.313%, 10-Yr is up 1.5bps at 4.646%, and 30-Yr is up 0.2bps at 5.216%.
- Italian BTP spread up 2.7bps at 112.7bps / Greek up 3.6bps at 82.3bps
MNI FOREX: AUD and NZD Consolidate Significant Losses, EURUSD Extends Pullback
- The dollar index spent Thursday’s session steadily reversing the FOMC-inspired move, culminating in the DXY looking to end the day up 0.46%. The greenback was supported by a similar reversal lower for equities, as weakness for European benchmarks dragged the major US indices down, albeit by a more moderate amount.
- The waning risk sentiment left the likes of AUD and NZD at the bottom of the G10 leaderboard. For AUDUSD (-0.96%), we had noted that 0.6400 continued to provide important pivot resistance, and today’s resumption of weakness highlights the medium-term bearish technical outlook.
- Price action has been supported by the weaker-than-expected Australian jobs data overnight, and AUDUSD has significantly narrowed the gap to initial support, which is at 0.6259, the Mar 11 low. Below here, a move below key short-term support at 0.6187, the Mar 4 low, is required to resume the downtrend.
- Crude markets have firmed after the US sanctioned a Chinese “teapot” refinery for the first time, alongside further tankers carrying Iranian crude. Price dynamics prompted a solid reversal higher for the Canadian dollar, leaving USDCAD around unchanged levels.
- The Euro has also weakened, prompting EURUSD to extend its reversal from cycle highs to 140 pips, registering a low of 1.0815. Support for the pair remains much further out, at 1.0599, the 50-day EMA and a short-term pivot level.
- Both SEK and CHF remain weaker on the session, with the Riksbank averting any hawkish risks and the Swiss National Bank siding with the consensus and delivering a 25bp rate cut to 0.25%.
- The Bank of England decision had some very marginal hawkish additions (Mann voting for unchanged), however, the small pop higher for GBPUSD was swiftly pared. Cable has been unable to maintain a rally above 1.30 in recent sessions, prompting the pair to drift back towards 1.2950 ahead of the APAC crossover.
- Japan national CPI crosses early Friday, before Canadian retail sales headlines the North American calendar.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 21/03/2025 | 0700/0700 | *** |  GB | Public Sector Finances |
| 21/03/2025 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 21/03/2025 | 0900/1000 | ** |  EU | EZ Current Account |
| 21/03/2025 | 1100/1100 | ** | GB | CBI Industrial Trends |
| 21/03/2025 | 1230/0830 | ** |  CA | Retail Trade |
| 21/03/2025 | 1305/0905 |  US | New York Fed's John Williams | |
| 21/03/2025 | 1500/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 21/03/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 21/03/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |