EXECUTIVE SUMMARY
- MNI: Fed's Harker Urges Stay The Course On Rates Policy
- MNI: Fed's Schmid Says His Concerns Over Inflation Grow
- MNI: Fed Can Be Patient, Policy Not Very Restrictive-Hammack
- MNI STIR: Trump Tariff Threats Set The Tone For Day’s Rates Divergence
- MNI US DATA: Decline In Pending Home Sales Bodes Ill For Market Activity
- MNI US DATA: Initial Claims Surprise With Highest Since Dec But No Standout Driver
US
MNI: Fed's Harker Urges Stay The Course On Rates Policy
The Federal Reserve should stick to its current interest rate policy and allow restrictive rates to keep pressure on prices despite inflation progress slowing over the past several months, Philadelphia Fed President Patrick Harker said Thursday. "I am of a position that we let monetary policy continue to work," he told a conference at the University of Delaware.
MNI: Fed's Schmid Says His Concerns Over Inflation Grow
Elevated inflation and rising inflation expectations since the start of the year are sowing doubts over whether price pressures will continue to ease, Federal Reserve Bank of Kansas City President Jeff Schmid said Thursday. He also reaffirmed his desire to keep QT going as long as possible to shrink the balance sheet to a smaller size.
MNI: Fed Can Be Patient, Policy Not Very Restrictive-Hammack
Federal Reserve officials can take their time before taking any additional action on interest rates because of upside inflation risks and labor market conditions are healthy, Cleveland Fed President Beth Hammack said Thursday. "I believe that monetary policy has the luxury of being patient as we assess the path forward, and this will likely mean holding the federal funds rate steady for some time. We have made good progress, but 2% inflation is not in sight just yet," she said in prepared remarks to the annual Columbia SIPA banking regulation conference.
NEWS
MNI STIR: Trump Tariff Threats Set The Tone For Day’s Rates Divergence
Cross-market rates clearly show the impact from today’s tariff threats from Trump, earlier ‘confirming’ a Mar 4 timeline for tariffs on Canada, Mexico and China, with the latter including an additional 10% tariff on top of the already in place 10%. Recall he had yesterday said they would go into effect Apr 2 in what appeared to be a kicking back of the previously proposed March dates.
- Markets are also on watch for supposedly imminent details on EU tariffs after Trump talked on 25% tariffs on cars and “other things”. Speaking to the UK’s Starmer, he’s just repeated that there will reciprocal tariffs on the EU (due Apr 2 per previous report) but no more specific details just yet.
- See the below charts for the discrepancy between the push higher in SOFR yields (up to 4bp higher for 2026 contracts, as tariff comments helped offset mixed but at the margin dovish US data) vs Euribor yields circa 4bps lower for 2026 contracts on the day.
- Canadian sensitivity to tariffs sees CORRA implied yields with similar declines to Euribor through 2025 contracts, less so after that.
- However, there is still a marked difference when comparing yield changes since shortly ahead of Friday’s European close; continued prospects of heavy European defense spending and the broader results of the German election have seen sizeable underperformance for both Euribor and Sonia futures vs SOFR over the week.
MNI US-RUSSIA: We Do Not Reject Peaceful Settlement To UKR Crisis - Putin
Reuters reporting comments from Russian President Vladimir Putin, speaking at an event with Russian security officials. Putin says that “first contacts” with the Trump administration “inspire hope” that Moscow and Washington are “ready to set up cooperation”. Putin says Russia does “not reject peaceful solution to Ukraine crisis” but stresses that it is important that those involved in talks show "pragmatism" and “reject stereotypes of their predecessors.”
MNI US-RUSSIA: Officials Meet In Istanbul For Second US-Russia Diplomatic Summit
Russian Foreign Ministry spokeswoman Maria Zakharova told reporters that Moscow hopes today’s meeting between Russian and US diplomats in Istanbul, “will be first in series of meetings that will bring us closer to solving our problems.” While a US State Department spokesperson said, “Ukraine is not on the agenda," the ongoing normalisation of diplomatic relations is seen as a crucial step towards a negotiated settlement to the war. The talks, the second high-profile diplomatic summit since US President Donald Trump took office, comes ahead of a bilateral meeting between Trump and UK Prime Minister Keir Starmer at the White House today.
MNI US TSYS: Risk-Off Pauses While Risk Factors Remain
- The steady risk-off support in Treasuries since mid-February paused Thursday, curves rebounding off two-week lows (partially tied to late 5Y/30Y Ultra steepener Block). Treasuries nearly breached the highest levels since mid-December but quickly retreated following this morning's data:
- Initial claims were higher than expected at 242k (sa, cons 221k) in the week to Feb 22, after an upward revised 220k (initial 219k); Core PCE inflation was revised up in the second Q4 release, although at 2.65% annualized from an initial 2.50%, it was exaggerated on screens by rounding to 2.7%; Pending home sales in January fell much more sharply than expected (-4.6% vs -0.9% expected, -4.1% prior rev from -5.5%).
- Pres Trump confirmed a March 4 timeline for tariffs on Canada, Mexico and China, with the latter including an additional 10% tariff on top of the already in place 10%.
- The Jun'25 10Y contract trades -4.5 at 110-24 after the bell, inside technicals: resistance at 110-29.5 (High Feb 26), support below at 110-00 (High Feb 7 and a recent breakout point).
- Cross asset: Stocks retreated, weighed by tech stocks (SPX eminis -94.50 at 5876.25); Gold plummeted (-41.61 at 2874.780); Crude rallied (WTI +1.53 at 70.15). Bbg US$ index clung to session highs for much of the session: BBDXY +7.74 at 1294.13.
OVERNIGHT DATA
MNI US DATA: Decline In Pending Home Sales Bodes Ill For Market Activity
Pending home sales in January fell much more sharply than expected (-4.6% vs -0.9% expected, -4.1% prior rev from -5.5%), leaving the Y/Y measure at -5.2% (-1.1% expected, -3.1% prior rev from -2.9%), per the NAR's Pending Home Sales Index.
- This was an all-time low for the index, with the 70.6 reading representing sales nearly 30% below the levels of 2001. Activity dropped in 3 of 4 regions (Northeast +0.3%), with sales in the South collapsing 9.2% M/M to an all-time low index reading of 81.0. The latter is a major turn for the worse for a region that drove sales improvements in 2020-22.
- Per the NAR’s Chief Economist Lawrence Yun, weather effects may have played a role: “It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months. However, it’s evident that elevated home prices and higher mortgage rates strained affordability.”
- But the downturn has been consistent since early 2022. And as a leading indicator of sales activity, as can be seen in the accompanying chart vs existing sales, this bodes poorly for home sales.
- As we continue to note, there is unlikely to be a turnaround unless interest rates fall substantially or unemployment picks up.
MNI US DATA: Initial Claims Surprise With Highest Since Dec But No Standout Driver
Initial claims were higher than expected at 242k (sa, cons 221k) in the week to Feb 22, after an upward revised 220k (initial 219k).
- The seasonally adjusted increase came as the 3k nsa decline offered a smaller drop than the adjustment factor was looking for rather than a particular increase (Massachusetts saw the largest increase of any state, with what looks like a fairly typical 3.7k).
- Note that it doesn’t look like there was a material influence from Maryland, Virginia and Washington DC from a federal government layoff angle (in addition to the deferred redundancy program that won’t show until Oct).
- Back to the seasonally adjusted data, the four-week average increased to 224k for its highest since December after steady readings in the 213-217k range, but is still only a little higher than the 218k averaged in 2019.
- Continuing claims meanwhile surprisingly fell to 1862k (cons 1871k) in the week to Feb 15 after a slightly downward revised 1867k (initial 1869k).
- This is a payrolls reference period for continuing claims, less favorable than the 1850k from the January period but still an improvement from two previous reference readings at 1897k.
MNI US DATA: Core PCE Upward Revision Shouldn’t Have Moved The Needle For January
- Core PCE inflation was revised up in the second Q4 release, although at 2.65% annualized from an initial 2.50%, it was exaggerated on screens by rounding to 2.7%.
- We don’t think this should materially alter forecasts ahead of Friday’s January print as some modest upward revisions had been assumed.
- Fed Governor Waller had eyed a core PCE print of around 0.25% M/M and the year-on-year rate rounding to 2.6% Y/Y, which technically needed those small upward revisions.
- Analyst unrounded estimates meanwhile had coalesced around 0.26% M/M for January (see the below table).
- This should show disinflationary progress from the 2.8% Y/Y in December (and also averaged in Q4) as favorable base effects swing into play.
- Six-month run rates (a metric Waller referred to along with the Y/Y) could have inched up one to two tenths from the 2.3% annualized currently seen for December pre-revisions.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 193.62 points (-0.45%) at 43239.5
S&P E-Mini Future down 86.25 points (-1.44%) at 5883
Nasdaq down 530.8 points (-2.8%) at 18544.42
US 10-Yr yield is up 1.1 bps at 4.2676%
US Mar 10-Yr futures are down 4/32 at 110-23
EURUSD down 0.0085 (-0.81%) at 1.0401
USDJPY up 0.62 (0.42%) at 149.74
WTI Crude Oil (front-month) up $1.51 (2.2%) at $70.13
Gold is down $42.45 (-1.46%) at $2873.91
European bourses closing levels:
EuroStoxx 50 down 55.43 points (-1%) at 5472.56
FTSE 100 up 24.75 points (0.28%) at 8756.21
French CAC 40 down 41.4 points (-0.51%) at 8102.52
US TREASURY FUTURES CLOSE
3M10Y +1.445, -3.855 (L: -6.35 / H: 0.353)
2Y10Y +2.366, 20.621 (L: 17.542 / H: 21.725)
2Y30Y +4.639, 48.198 (L: 42.922 / H: 49.774)
5Y30Y +3.575, 45.965 (L: 41.637 / H: 47.139)
Current futures levels:
Mar 2-Yr futures steady at at 103-3 (L: 103-00.25 / H: 103-03.75)
Mar 5-Yr futures down 0.75/32 at 107-16 (L: 107-08.75 / H: 107-16.75)
Mar 10-Yr futures down 4/32 at 110-23 (L: 110-13.5 / H: 110-27.5)
Mar 30-Yr futures down 12/32 at 117-29 (L: 117-14 / H: 118-10)
Mar Ultra futures down 25/32 at 123-23 (L: 123-09 / H: 124-15)
MNI US 10YR FUTURE TECHS: (M5) Structure Remains Bullish
- RES 4: 111-22+ High Dec 3 ‘24 and a key resistance
- RES 3: 111-00 Round number resistance
- RES 2: 110-31 1.00 proj of the Jan 13 - Feb 7 - Feb 12 price swing
- RES 1: 110-29+ High Feb 26
- PRICE: 110-19 @ 1235 ET Feb 27
- SUP 1: 110-00 High Feb 7 and a recent breakout point
- SUP 2: 109-13 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
A bullish cycle in Treasury futures remains in play. The contract has pierced resistance at 110-20, the 76.4% retracement of the Dec 3 - Jan 13 bear leg.
A clear break of this level would broaden the bullish recovery and signal scope for a climb towards the 111-00 handle, ahead of 111-22+, the Dec 3 high and a key resistance. Initial firm support to monitor is 109-13, the 50-day EMA. Clearance of this level would highlight a potential reversal.
SOFR FUTURES CLOSE
Mar 25 -0.003 at 95.70
Jun 25 steady00 at 95.895
Sep 25 +0.010 at 96.10
Dec 25 +0.005 at 96.230
Red Pack (Mar 26-Dec 26) +0.005 to +0.010
Green Pack (Mar 27-Dec 27) -0.01 to steady
Blue Pack (Mar 28-Dec 28) -0.02 to -0.01
Gold Pack (Mar 29-Dec 29) -0.03 to -0.02
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00032 to 4.32384 (+0.00454/wk)
- 3M -0.00528 to 4.31324 (-0.00829/wk)
- 6M -0.01887 to 4.25155 (-0.03921/wk)
- 12M -0.05207 to 4.12001 (-0.10341/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.33% (+0.00), volume: $2.487T
- Broad General Collateral Rate (BGCR): 4.31% (+0.00), volume: $945B
- Tri-Party General Collateral Rate (TCR): 4.31% (+0.00), volume: $929B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $108B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $297B
FED Reverse Repo Operation
RRP usage climbs to $182.044B this afternoon from $126.058B on Wednesday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 41 from 37 prior.
MNI PIPELINE: Corporate Bond Update: $2.25B GM Financial 3Pt Launched
$6.65B to Price Thursday, $53.2B/wk
- Date $MM Issuer (Priced *, Launch #)
- 02/27 $2.25B #GM Financial $1.2B 3Y +100, $300M 3Y SOFR, $750M 7Y +145
- 02/27 $900M #Public Service Electric & Gas $400M 10Y +78, $500M 30Y +98
- 02/27 $750M #National Bank of Canada 2NC1 +60
- 02/27 $750M #Ameren 10Y +110
- 02/27 $500M #Meritage Homes 10Y +143
- 02/27 $500M Brookfield Finance 30Y +125
- 02/27 $500M #Blackstone Lending +5Y +147
- 02/27 $500M #High Street Funding 30Y +125
MNI BONDS: EGBs-GILTS CASH CLOSE: Bunds Outperform As Tariff Threats Linger
Bunds easily outperformed Gilts Thursday in a broader curve steepening move, as US tariff concerns and weakness in equities remained dominant themes.
- Core instruments traded weakly in the early going, with heavy Italian supply and a rebound in gas prices weighing.
- US President Trump's repetition (and clarification) of tariff implementation on trading partners, with the EU (and not necessarily UK) in the crosshairs helped Bunds outperform versus both Treasuries and Gilts.
- Renewed weakness in European equities also helped the core rally.
- Spain kicked off the February Eurozone flash inflation round with core CPI below expectations.
- The German curve leaned bull steeper (slightly twist steepening with Buxl yields higher) with the UK's bear steepening.
- Spreads on the periphery widened toward the cash close in tandem with a pullback in equities.
- Flash February inflation data from Italy/France/Germany are Friday's scheduled highlights.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 3.3bps at 2.035%, 5-Yr is down 3.1bps at 2.165%, 10-Yr is down 2bps at 2.413%, and 30-Yr is up 0.2bps at 2.698%.
- UK: The 2-Yr yield is up 0.4bps at 4.179%, 5-Yr is up 0.5bps at 4.187%, 10-Yr is up 1bps at 4.512%, and 30-Yr is up 2bps at 5.114%.
- Italian BTP spread up 2bps at 113.2bps / Spanish bond spread up 2bps at 63.3bps
MNI EGB OPTIONS: Multiple Put Spread Purchases Across Bund, Euribor Thursday
Thursday's Europe rates/bond options flow included:
- RXJ5 130.50/129.50 put spread, bought for 16.5 on 10k
- RXJ5 130.50/129.50 put spread bought for 18.5 on 10K vs. 58s.
- ERJ5 97.75/97.685 put spread vs. ERM5 97.75/97.685 put spread paper paid 0.75 on 5K for the M5.
- ERH5 97.56/97.50 1x2 put spread paper paid 0.5 on 2K.
- ERJ5 97.81/97.75/97.68 put ladder, paper paid 1.25 on 4K.
- ERZ5 97.93/98.18/98.43/98.68c condor vs 97.50p, bought the condor for 4.25 in 5k.
- 2RM5 97.875^ paper paid 33 on 4K
MNI FOREX: Greenback Shoots Higher as Tariff Headlines Spur Volatility
- The USD index gapped higher on Thursday as President Trump announced that the proposed tariffs scheduled to go into effect on March 04 will be implemented as scheduled. The announcement came just one after the US president hinted that the Canada and Mexico tariffs could be delayed again, indicating that they were scheduled for April 2.
- Furthermore, details that China will be charged an additional 10% Tariff from March 04 has weighed on global sentiment, while impacting the Chinese Yuan negatively.
- USDCNH has risen 0.4% and USDCAD remains 0.6% higher on the session, both notably underperforming the advance for the USD index, which currently stands at 0.78% as we approach the APAC crossover.
- The lingering global concerns from US trade policy developments have weighed on risk sensitive currencies in G10, with both AUD and NZD the weakest in G10, declining close to 1%. For AUDUSD, the pair has pulled further away from 0.6400 resistance, and has substantially narrowed the gap to 0.6231, the Feb 10 low.
- Amid the firmer stance on tariffs, and the subsequent pessimism for major equity benchmarks, EURUSD (-0.70%) has moved sharply lower to a fresh weekly low of 1.0400 in recent trade. Trump’s comments yesterday on the imminent details for EU tariffs will be lingering, helping EURUSD to extend its pullback from a key resistance zone between 1.0525/33 that has been building in significance in recent sessions.
- The Feb 19 low at 1.0401 represents initial support, which has been tested. A break below here would signal a potential reversal threat, opening 1.0373 and 1.0317 as initial targets below.
- Despite the headlines, USDMXN remains in a familiar holding pattern, continuing to respect the short-term technical parameters of 20.30-20.55. President Sheinbaum saying there have been no conflicts that could derail a possible deal ahead of the deadline next week appears to be helping the peso resilience.
- German, France and Italy inflation data back in focus tomorrow, ahead of US PCE and Canada GDP.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 28/02/2025 | 0700/0800 | *** |  SE | GDP |
| 28/02/2025 | 0700/0800 | ** | SE | Retail Sales |
| 28/02/2025 | 0700/0800 | ** |  DE | Import/Export Prices |
| 28/02/2025 | 0700/0800 | ** | DE | Retail Sales |
| 28/02/2025 | 0700/0700 |  GB | BOE's Ramsden speech on MonPol in geopolitical fragmentation | |
| 28/02/2025 | 0700/0700 | * | GB | Nationwide House Price Index |
| 28/02/2025 | 0730/0830 | ** |  CH | Retail Sales |
| 28/02/2025 | 0745/0845 | *** |  FR | HICP (p) |
| 28/02/2025 | 0745/0845 | ** | FR | Consumer Spending |
| 28/02/2025 | 0745/0845 | *** | FR | GDP (f) |
| 28/02/2025 | 0800/0900 | ** | CH | KOF Economic Barometer |
| 28/02/2025 | 0855/0955 | ** | DE | Unemployment |
| 28/02/2025 | 0900/1000 | *** | DE | North Rhine Westphalia CPI |
| 28/02/2025 | 0900/1000 | *** | DE | Bavaria CPI |
| 28/02/2025 | 0900/1000 | ** |  EU | ECB Consumer Expectations Survey |
| 28/02/2025 | 0900/1000 | *** | DE | Baden Wuerttemberg CPI |
| 28/02/2025 | 1000/1100 | *** |  IT | HICP (p) |
| 28/02/2025 | 1300/1400 | *** | DE | HICP (p) |
| 28/02/2025 | 1330/0830 | *** |  CA | GDP - Canadian Economic Accounts |
| 28/02/2025 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 28/02/2025 | 1330/0830 | *** | CA | CA GDP by Industry and GDP Canadian Economic Accounts Combined |
| 28/02/2025 | 1330/0830 | *** |  US | Personal Income and Consumption |
| 28/02/2025 | 1330/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 28/02/2025 | 1445/0945 | *** | US | MNI Chicago PMI |
| 28/02/2025 | 1600/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 28/02/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 01/03/2025 | 0130/0930 | *** |  CN | CFLP Manufacturing PMI |
| 01/03/2025 | 0130/0930 | ** | CN | CFLP Non-Manufacturing PMI |