Highlights:
- EUR & German yields rise as report suggests Germany have found solution to debt brake passage
- UMich watched carefully for stagflationary forces
- UK GDP dips, calling UK growth path into question for this year
- Treasuries sit modestly lower on the day, primarily following earlier equity futures stabilization and crude oil futures lifting further off yesterday’s lows.
- There is also very recently some small spillover from a sizeable sell-off in Bunds on Handelsblatt reporting the CDU/CSU, SPD and Greens have reportedly agreed on their financial package.
- Government shutdown odds are lower after Democrat Senator Chuck Schumer stated he will support the stopgap funding bill.
- Cash yields are 1-3bp higher on the day, with the front-end lagging increases.
- 2s10s at 33.2bps (+1.7bp) is within recent ranges.
- TYM5 are back at earlier session lows of 110-24 (-06) on still limited cumulative volumes of 265k after a circa 30k uplift since the German fiscal headlines.
- Support remains intact, at 110-12+ (Mar 6 and 13 low), whilst the trend needle continues to point north with resistance at 111-25 (Mar 11 high).
- Data: U.Mich consumer survey Mar prelim (1000ET) - see STIR bullet.
STIR: Only Just Pricing 25bp Fed Cut In June
- Fed Funds implied rates are up to 1.5-2bp higher for Jun-Dec 2025 meetings overnight, helped by the stabilization in equity futures and crude oil futures lifting off yesterday’s lows.
- Cumulative cuts from 4.33% effective: 0.5bp Mar, 9bp May, 25bp Jun, 35bp Jul and 71bp Dec.
- It leaves a rate path at the high end of wide ranges seen for the week, with 70bp of cuts for 2025 back to almost exactly where we ended last week having at one point priced almost 90bps late Mon/early Tue.
- Growth concerns clearly weigh further out the curve though, with 2027 SOFR implied yields still 6-7bps lower on the week.
- The preliminary U.Mich consumer survey for March is likely watched again although partisanship has seen its quality called into question. 1Y expectations have spiked to 4.3% and 5-10Y have increased to a multi-decade high of 3.5% but these moves haven’t been reflected in the NY Fed’s equivalent survey for February.
CROSS ASSET: Bund Futures Dip As HB Reports Agreement Between German Parties
Latest from Handelsblatt, which appears to be factoring into the latest downside in Bund futures and upside in EUR crosses:
"The CDU/CSU, SPD, and Greens have reportedly agreed on a solution for the financial package. Handelsblatt learned this from parliamentary group sources. Details initially remained unclear. The CDU/CSU, SPD, and Greens apparently plan to inform their parliamentary groups about the negotiation results at 1 p.m. Since these changes involve changes to the Basic Law, a two-thirds majority in the Bundestag is required. The changes are now expected to be passed next week. They must then be passed by the Bundesrat."
MNI US Inflation Insight: Price Pressures Remain Elevated
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EXECUTIVE SUMMARY
- Core CPI moderately undershot expectations in February with 0.23% M/M (unrounded median 0.27) following its much stronger than expected 0.45% in January.
- However, much of the downward surprise was driven by non-PCE relevant categories with airfares (-4% vs 1% expected) and vehicle insurance (0.3% vs 1% expected).
- Core PPI metrics then also came in softer than expected but, importantly for the short-term market reaction, saw details that helped confirm and if not slightly firm further the readthrough to the Fed’s preferred core PCE.
- Analysts estimates track circa 0.32/0.33% M/M for core PCE, an acceleration from the 0.285% in January at what would technically be its highest in eleven months.
- This should see both three- and six-month run rates accelerate notably, from 2.4% to 3.3% and from 2.6% to 3.0% respectively for highs since April and June.
- Fed Funds futures at one point priced just 67bp of cuts for 2025 vs 71bp seen prior to CPI having sold off into the release, but are currently back to 75bp of cuts as equities sliding on US policy induced growth concerns have outweighed the firmer core PCE tracking. A next 25bp Fed cut is seen coming in June.
US TSY FUTURES: Long Setting Across The Curve On Thursday
OI data points to net long setting across the curve during yesterday’s rally.
- A net ~$9.7mln of fresh DV01 equivalent exposure was added across the curve, with the most prominent movement coming in FV, TY & US futures.
| 13-Mar-25 | 12-Mar-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 3,914,659 | 3,893,200 | +21,459 | +842,302 |
FV | 6,307,052 | 6,243,731 | +63,321 | +2,772,685 |
TY | 4,762,000 | 4,721,708 | +40,292 | +2,595,983 |
UXY | 2,246,317 | 2,237,432 | +8,885 | +792,577 |
US | 1,775,885 | 1,760,465 | +15,420 | +2,013,275 |
WN | 1,773,285 | 1,769,853 | +3,432 | +658,095 |
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| Total | +152,809 | +9,674,916 |
STIR: Net Long Setting Most Prominent In SOFR Futures On Thursday
OI data suggests that net long setting provided the most prominent positioning move during Thursday's rally in SOFR futures, although pockets of net short cover were seen.
| 13-Mar-25 | 12-Mar-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,056,287 | 1,059,130 | -2,843 | Whites | +5,959 |
SFRH5 | 1,278,408 | 1,291,332 | -12,924 | Reds | +19,849 |
SFRM5 | 1,166,938 | 1,148,430 | +18,508 | Greens | +31,070 |
SFRU5 | 922,785 | 919,567 | +3,218 | Blues | -4,327 |
SFRZ5 | 1,051,021 | 1,024,881 | +26,140 |
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SFRH6 | 670,479 | 678,475 | -7,996 |
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SFRM6 | 626,672 | 620,198 | +6,474 |
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SFRU6 | 604,038 | 608,807 | -4,769 |
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SFRZ6 | 804,804 | 793,628 | +11,176 |
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SFRH7 | 476,204 | 467,189 | +9,015 |
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SFRM7 | 470,111 | 459,576 | +10,535 |
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SFRU7 | 312,042 | 311,698 | +344 |
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SFRZ7 | 399,853 | 404,740 | -4,887 |
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SFRH8 | 215,107 | 215,206 | -99 |
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SFRM8 | 177,808 | 177,327 | +481 |
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SFRU8 | 130,904 | 130,726 | +178 |
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FOREX: JPY Falters as Rengo Tally Falls Short of Survey
- Rengo pay tallies have again proved market moving - while unions are set to demand a faster pace of pay rises this year (5.46% from 5.28%), the final demand may turn out lower than many surveys had estimated - undermining the JPY and helping aide USD/JPY toward the mid-week high of 149.19.
- UK economic data out this morning surprised to the downside, with GDP surprisingly contracting in January while industrial and manufacturing production data came in well below forecast. GBP is softer as a result, with sell-side marginally marking lower growth expectations for this year - meaning possible implications for the BoE's policy profile. GBP/USD's returned closer to the $1.2900 handle as a result, with 1.2914 marking first support before the psychological level.
- Antipodean currencies are undergoing a minor relief rally, helping tip AUD, NZD to the top end of the G10 table - although both AUD/USD and NZD/USD remain largely rangebound on the week. AUD/USD still sees S/T support at the 50-dma of 0.6274.
- Preliminary Uni of Michigan sentiment data marks the data highlight Friday, with markets likely to keep a close eye on the inflation expectations component - it's this figure that surprised materially to the upside last month, triggering market concern over stagflationary forces in the US economy. Consensus looks for the 1yr expectation to hold at 4.3% this month, with the longer-term expectation moderating to 3.4%.
OPTIONS: Expiries for Mar14 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0750(E808mln), $1.0850-55(E550mln)
- USD/JPY: Y146.00($1.0bln), Y149.50-55($801mln), Y150.50($666mln)
- GBP/USD: $1.2755(Gbp500mln)
- AUD/USD: $0.6125(A$1.1bln), $0.6400-10(A$1.0bln)
- USD/CAD: C$1.4450($890mln), C$1.4700($1.2bln)
- USD/CNY: Cny7.2500($655mln), Cny7.2900($566mln)
EQUITIES: S&P Formally Enters Correction Territory
- The trend condition in S&P E-Minis remains bearish and fresh cycle lows this week have reinforced current conditions. MA studies are in a bear-mode set-up highlighting a dominant downtrend Sights are on the next important support at 5499.25.
- The medium-term trend direction in the Eurostoxx 50 futures contract remains up and the latest pullback appears corrective - for now. However, support at the 50-day EMA, at 5311.55, has been pierced. A clear break of this average would highlight a strong short-term bear threat.
COMMODITIES: Momentum Pointed Higher for Gold
- A clear uptrend in Gold remains intact and yesterday’s move higher reinforces current conditions. The yellow metal has traded to a fresh all-time high and sights are on the psychological $3000 handle next.
- A bearish condition in WTI futures remains intact and the contract continues to trade closer to its recent lows. The latest sell-off resulted in a breach of $70.20, the Feb 6 low.
| Date | GMT/Local | Impact | Country | Event |
| 14/03/2025 | 1230/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 14/03/2025 | 1230/0830 | ** | CA | Wholesale Trade |
| 14/03/2025 | 1315/1415 |  EU | Cipollone in panel discussion at "Fifty years of Consob: present and future - Reflections in Bocconi" Milan | |
| 14/03/2025 | 1400/1000 | *** |  US | U. Mich. Survey of Consumers |
| 14/03/2025 | 1400/1000 | ** | US | University of Michigan Surveys of Consumers Inflation Expectation |
| 14/03/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 14/03/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |