MNI ASIA OPEN - US Consumer Puts Inflation Exp. at 8-Yr High

US

US Treasury Launches USD350B in State, Local Relief Funds (MNI)
The U.S. Treasury Department Monday launched state and local fiscal recovery funds totaling USD350 billion in relief, with the thousands of eligible jurisdictions able to tap the funds in coming days.

U.S. Consumers Raise Outlook for Inflation- NY Fed Survey (MNI)
U.S. consumers upped their short-term inflation expectations again in April to an 8-year high, although medium-term inflation expectations were unchanged, according to a Federal Reserve Bank of New York survey published Monday.

Year-ahead median inflation expectations ticked up to 3.36% in April from 3.24% in March, the highest since September 2013, while three year-ahead median inflation expectations were unchanged at 3.10%.

MNI INTERVIEW: NY Fed Adviser Fears Price Expectations To Spike (MNI)
The Federal Reserve's promise to keep interest rates near zero until it has fully reached inflation and employment goals risks a delayed monetary tightening that will spark a dangerous unanchoring of inflation expectations, NY Fed Adviser John Cochrane told MNI.

Fed Kaplan: Labor Market May be Tighter than Assumed (MNI)
Dallas Fed President Robert Kaplan said Thursday he sees "real headwinds" in making improvements in labor force participation, and the current labor market is likely tighter than some may assume.

ASIA

China Eyes Dirty Industry Bailout To Limit Bond Defaults (MNI)
China is considering a large-scale injection of public funds into dirty industries due to be phased out to meet climate targets, reducing default risk among companies with hundreds of billions of yuan in outstanding bonds with upgrades to cleaner technology and helping obsolete plants keep up debt payments during their remaining lifespan, policy advisors told MNI.

EUROPE

MNI BRIEF: Can Adjust Pace Of Bond Buys As Needed: ECB Lane (MNI)
The European Central Bank will look again in June at whether financing conditions remain favourable and can use the flexibility of the Pandemic Emergency Purchase Program to either increase of slow the pace of bond purchases as required, Chief Economist Philip Lane said in an interview with Le Monde published Monday.

MNI BRIEF: UK House Prices At Fresh Record High (MNI)
UK house prices rose to a record high for a second consecutive month in April, the Halifax said Monday, rising 8.2% y/y. The average property value across the country is now GBP 258,204, up 1.4% m/m.

US TSYS SUMMARY: Curve Steepens, Markets Eye Sizeable Corp Supply

• US 10-yr yields opened the Monday session higher, before the belly of the curve saw some slippage through the Wall Street open, pressing 10-yr yields lower to touch 1.55%. This downward pressure eased as markets eyed sizeable supply from both the corporate pipeline as well as the busy auction schedule this week.
• The curve traded steeper as the long-end underperformed:
  - 2-yr yield rose 0.8 bps to trade 0.153%
  - 10-yr yield rose 2.7bps to trade 1.604%
  - 30-yr yield rose 4.2bps to trade 2.319%
• Tech sector fell sharply Monday, with the likes of Facebook and Alphabet leading losses after being downgraded at Citi. Citi forecast potential weakness in the online advert market, undercutting earnings growth for both firms. NASDAQ-100 fell as much as 2%.
• Corporate pipeline saw sizeable activity Monday, with $ deals amounting to as much as $45bln this week. Deals from Canada, JSW Hydro, Korea Expressway as well as talk of jumbo-sized issuance were in focus. Amazon's $18.5bln eight-parter also a highlight.
• Auction schedule kicks off tomorrow, with $58bln in 3-yr, $41bln 10-yr and $27bln 30-yr starting Tuesday.

EGBs-GILTS CASH CLOSE: Weaker But Yields Off Highs

Core FI traded weaker Monday with bear steepening in Bunds and Gilts, though yields ended off session highs as equities traded softer in the afternoon. Periphery spreads tightened.

• Fading odds of a Scottish independence referendum and further lockdown helped contribute to Gilt underperformance.
• ECB's Lane discussed possibility of slowing or hastening bond purchases in June; afternoon weekly purchase data showed a PEPP slowdown (but overall asset buying accelerated).
• DMO made some Jun-Sep qtly announcements ahead of May 17 consultation
• Tuesday sees sales of Dutch DSL and 2x UK Gilts, with Germany set to syndicate 30-Yr Green bund.
• We also hear from BoE's Bailey and ECB's Knot / de Cos, with some CPI (Netherlands) and IP (Italy) data, as well as German ZEW.

Closing yields/10-Yr Spreads to Bunds:

• Germany: The 2-Yr yield is unchanged at -0.686%, 5-Yr is down 0.4bps at -0.591%, 10-Yr is up 0.3bps at -0.212%, and 30-Yr is up 0.8bps at 0.359%.
• UK: The 2-Yr yield is up 0.5bps at 0.038%, 5-Yr is up 0.8bps at 0.321%, 10-Yr is up 1.3bps at 0.788%, and 30-Yr is up 1.5bps at 1.329%.
• Italian BTP spread down 4bps at 114bps / Spanish spread down 2.3bps at 67.9bps

FOREX: GBP Consolidates Strong Rally Following 1.40 Breakout

• GBPUSD extended gains today to confirm a break of the 1.4000 handle, surging 1.2% to trade at 1.4150. Following the build up of a cluster of daily highs and constant rejection of the psychological level on a closing basis, GBPUSD shot higher on the open and never looked back.
• Contributing fundamental factors include:
  • UK politics seeing the Tories make further inroads into traditional Labour strongholds
  • Prime minister Johnson also confirmed that the next stage of re-opening will go as planned on the 17th, following last week's headline that two thirds of UK adults have received a first vaccination.
• A close above 1.4141 will represent the highest daily close since April 2018. The move higher negates the recent bearish focus and resumes a technical bullish theme with attention turning to 1.4237 High Feb 24 and a key resistance.
• USDCAD (-0.45%) continued its most recent descent, trading below 1.21 for the first time since September 2017.
• Elsewhere G10 currencies were confined to tighter ranges with the US dollar index retreating by just 0.1%. The Commodity complex sharply reversed lower during the US session, prompting AUD, NZD and EUR to all trade off their best levels, but the quick moves were unable to ignite any meaningful dollar strength.