Highlights:
- Front-end yields under pressure headed into PPI, PCE inputs closely watched
- German politics in focus; Bundestag meets for first phase of debt brake proposal debate
- AUD/JPY under pressure as equity sentiment remains fragile
- Treasuries are touching session lows across the board, dragged by EGBs with Italian/Greek supply weighing and equities recovering.
- The chance of a government shutdown on Saturday increased after Senate Minority Leader Chuck Schumer (D-NY) said Democrat senators should withhold their votes from the full-year funding measure that passed the House of Representatives this week.
- Today’s data focus is firmly on PCE-relevant PPI details and jobless claims, although expect continued attentiveness to political headlines around the Trump administration’s sensitivity to a lower growth outlook.
- Cash yields are 1-2.5bp higher across the curve, with the front-end lagging as 2s currently test 4% having peaked for the week at 4.0011% after yesterday’s CPI. They were as low as 3.825% late Mon/early Tue depending on your timezone.
- TYM5 has recently touched session lows of 110-17+ (-03) as it nears the post-CPI low of 110-15+, on reasonable overnight volumes of 340k.
- This low in turn stopped short of support at 110-12+ (Mar 6 low) but the trend needle points north with resistance at 111-25 (Mar 11 high) before 112-01 (Mar 4 high).
- Data: PPI Feb (0830ET), Weekly jobless claims (0830ET), Household net worth Q4 (1200ET)
- Coupon issuance: US Tsy $22B 30Y Bond auction reopen - 912810UG1 (1300ET)
- Bill issuance: US Tsy $75B 4W & 8W bill auctions (1130ET)
STIR: Scope For Renewed Sensitivity To Dovish PPI Details Or Claims
- Fed Funds implied rates broadly hold yesterday’s climb, which started ahead of US CPI but continued after as hotter core PCE implications outweighed softer than expected core CPI.
- Today’s US PPI report will be in the driving seat in the near-term as it rounds out the major steers for core PCE tracking, with unrounded analyst estimates averaging circa 0.32% M/M for Feb.
- Cumulative cuts from 4.33% effective: 0.5bp Mar, 9bp May, 25bp Jun, 37bp Jul and 71bp Dec.
- The recovery in pricing off dovish extremes early in the week (at one point sustainably pricing 85bp of cuts for the year) has seen a next cut only just fully priced in June vs 33bp prior to last week’s payrolls report. This June contract has seen the largest post-NFP adjustment of any 2025 meeting.
- It also re-raises sensitivity to any dovish surprises from PCE-relevant PPI details or jobless claims.
US OUTLOOK/OPINION: Barclays Add A Second Fed Cut For 2025 On Softer Growth
- Barclays now expect 2x25bp cuts from the FOMC this year (Jun & Sep) vs just once in June previously, and see it cutting three times in 2026 (Mar, Jun & Sep).
- “President Trump has shown more appetite to impose widespread tariffs than we had previously anticipated. We thus raise our baseline assumption of the trade-weighted tariff rate from about 10% to 15%.”
- They have lowered their GDP forecast -0.8pps to 0.7% Q4/Q4 in 2025 and raised their u/e rate forecast +0.4pps to 4.2% in 4Q25.
- They see core PCE inflation ending this year at 3.2% Q4/Q4 (+0.4pp) before moderating to 2.2% Q4/Q4 in 2026 “as the effects of tariffs dissipate”.
GERMANY: Greens-No Progress On Debt Brake Talks, Bundestag Meets @ 1200CET
With the Constitutional Court's decision on petitions from the far-right Alternative for Germany (AfD) and far-left Die Linke to halt the passage of the debt brake reform still pending, the old Bundestag convenes today at 1200CET (0700ET, 1100GMT) to begin debate on the package.
- With a two-thirds majority required to pass the debt brake reform, the stance of the environmentalist Greens remains crucial. Parliamentary group leader Katharina Dröge said to ARD earlier that due to the lack of progress in talks with the centre-right Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU) and the centre-left Social Democrats (SPD) "it remains the case that we Greens will not support this draft bill." Green lawmaker Britta Hasselmann has also said that 'no progress' has been made in talks.
- As well as the AfD and Linke petitions, Sevim Dagdelen from the left-wing nationalist Sahra Wagenknecht Alliance (BSW) has said that he intends to file an urgent application with the court to halt the progress of the package.
- If the package passes the first vote after a 3 1/2 hour debate, it will go to the committee stage before a second Bundestag session on 18 March for a final vote.
- The Constitutional Court could release its decision at any time, but it certainly will do so before 18 March.
- Should the Court rule against the AfD/Linke/BSW petitions, and the Bundestag pass the measures, it will then go to the Bundesrat, where the CDU/CSU, SPD and Greens also hold a 2/3 majority.
GERMANY: Coalition Negotiations To Get Underway w/Focus On Bundestag Session
While there will be significant market focus on events in the Bundestag today, this afternoon at the HQ of the centre-right Christian Democratic Union (CDU) formal negotions will get underway with the centre-left Social Democrats (SPD) on forming a governing coalition.
- Two-hundred and fifty-six politicians will form 16 working groups to discuss various areas of policy detail. Each working group is comprised of 16 individuals: seven from the SPD, six from the CDU and three from the CDU's Bavarian sister party, the Christian Social Union (CSU).
- The 11-page exploratory paper agreed upon by the leaders of the three parties form the basis of talks, with each group tasked with formulating more concrete policies from the broad aims of the document.
- Party leaders have set a short timeframe for the working groups to hold talks, with the 16 due to present their efforts within 10 days that will allow the finalisation of a coalition agreement.
- CDU leader Friedrich Merz is looking to be installed as chancellor by Easter (20 April), around 50 days since the 23 Feb election. This would represent a significant acceleration of the process compared to the 2023 election (171 days) and even after the 2021 election that also resulted in a CDU/CSU-SPD 'grand coalition' (73 days).
Of course, the developments in the Bundestag over the coming days will have a major impact on the coalition talks. Whether the old parliament can pass the major fiscal loosening will have a significant impact on the incoming gov'ts spending capabilities.
US TSY FUTURES: Short Setting In Intermediates Dominated Wednesday
OI data points to a mix of net short setting (TY, UXY & WN) and long cover (TU, FV & US) during yesterday’s sell off in Tsy futures.
- The short setting provided the most meaningful positioning input, with a cumulative DV01 equivalent of $4mn fresh net shorts set across TY & UXY futures.
| 12-Mar-25 | 11-Mar-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 3,893,549 | 3,914,123 | -20,574 | -810,407 |
FV | 6,242,710 | 6,243,223 | -513 | -22,472 |
TY | 4,723,458 | 4,692,330 | +31,128 | +2,004,040 |
UXY | 2,238,514 | 2,215,908 | +22,606 | +2,013,454 |
US | 1,759,855 | 1,769,159 | -9,304 | -1,208,582 |
WN | 1,769,970 | 1,760,045 | +9,925 | +1,921,405 |
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| Total | +33,268 | +3,897,437 |
STIR: Short Setting Dominated In SOFR Futures On Wednesday
OI data suggests that short setting dominated in SOFR futures on Wednesday, as the strip twist steepened.
- Only a single round of net long setting (SFRZ4) and modest rounds of net long cover interrupted the broader trend.
| 12-Mar-25 | 11-Mar-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,059,130 | 1,056,906 | +2,224 | Whites | +22,121 |
SFRH5 | 1,289,427 | 1,296,103 | -6,676 | Reds | +69,271 |
SFRM5 | 1,148,430 | 1,131,627 | +16,803 | Greens | +23,199 |
SFRU5 | 921,594 | 911,824 | +9,770 | Blues | +4,635 |
SFRZ5 | 1,024,911 | 989,063 | +35,848 |
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SFRH6 | 678,873 | 673,527 | +5,346 |
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SFRM6 | 624,222 | 604,039 | +20,183 |
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SFRU6 | 609,020 | 601,126 | +7,894 |
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SFRZ6 | 794,962 | 772,861 | +22,101 |
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SFRH7 | 469,870 | 471,364 | -1,494 |
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SFRM7 | 459,925 | 464,759 | -4,834 |
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SFRU7 | 311,698 | 304,272 | +7,426 |
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SFRZ7 | 404,865 | 400,201 | +4,664 |
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SFRH8 | 215,206 | 216,343 | -1,137 |
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SFRM8 | 177,327 | 178,696 | -1,369 |
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SFRU8 | 130,730 | 128,253 | +2,477 |
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FOREX: Aussie Weakness Standing Out, AUDJPY Bearish Theme Intact
- Equity sentiment turned more risk averse as the Thursday Asia Pac session unfolded. Eminis are under pressure, while Hong Kong markets track lower for the 5th straight session. These dynamics have weighed on the likes of AUD and NZD overnight, comfortably the weakest in G10.
- Notably, the Melbourne Institute’s consumer inflation expectations reversed sharply lower in March with a 1pp decline to 3.6%. This was the lowest reading since Covid-impacted August 2021 and is now down around 3pp from June 2022’s peak, assisting the bearish AUD sentiment.
- A firmer Japanese Yen on Thursday has seen AUDJPY fall ~0.6% today, and the ongoing weakness/volatility in equity markets will keep this cross firmly in the spotlight in coming weeks. Both 20- and 50-day EMAs have acted as strong resistance, and the cross has spent March consolidating comfortably below the 95.00 handle, keeping a bearish threat at the fore. Two lows at 91.86 provide initial support, of which a breach would target a move to the carry unwind lows around 90.00 from August last year.
- A reminder that Goldman Sachs reiterated recently that softer activity data out of the US makes being short AUDJPY the best trade as it typically sees among the greatest returns in a backdrop of lower equities and lower yields.
- Rising chances of a US government shutdown on Saturday also increase the uncertainty surrounding the US economy, which keeps the AUDJPY downside vulnerable at this juncture. Immediate attention is on US PPI later today as many core PPI components feed into the Fed’s preferred measure of core PCE.
FOREX: EUR Hampered by Lack of Deal Progress
- JPY trades firmer against all others early Thursday, the inverse of the price action seen at this point yesterday - however USD/JPY has bounced well off the pullback lows at Y147.58. The EUR trades under moderate pressure on the back of further concerns over the passage of the debt brake proposals in Germany. The leader of the Greens Party confirmed this morning that no progress has been made in the talks with the CDU and SPD, meaning no concessions have been agreed, and we're no nearer the passage of the legislation. The old Bundestag convenes today at 1200CET (0700ET, 1100GMT) to begin debate on the package.
- Antipodean currencies are underperforming as this week's bounce in risk faded off highs. Core European indices have consolidated a recent bounce, with yesterday's soft Wall Street close filtering into European trade this morning.
- AUD/USD has faltered on the approach to tried-and-tested resistance at 0.6352, the 100-dma. Meanwhile,
AUD/JPY is showing through Y93.00, as risk off grips equity markets again. Recent lows in the pair, around 91.80/85 were seen in the first part of March. AUD/USD is back under 0.6300 as well, the weakest performed in the G10 space. - Following yesterday's CPI print, near-term focus shifts to the PPI numbers due later today, alongside the weekly jobless claims numbers. Russian President Putin has cryptically confirmed he may hold an international phone call later today - for which speculation runs high that it may be with President Trump, concerning an imminent ceasefire in Ukraine.
OPTIONS: Expiries for Mar13 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0800(E1.3bln), $1.0850-60(E1.5bln), $1.0957(E757mln)
- USD/JPY: Y148.00($1.3bln)
- USD/CAD: C$1.4250($968mln), C$1.4350-65($775mln), C$1.4400-10($825mln)
EQUITIES: Medium-Term Trend Direction in Eurostoxx 50 Futures Remains Up
- The medium-term trend direction in the Eurostoxx 50 futures contract remains up and the latest pullback appears corrective. However, support at the 50-day EMA, at 5311.01, has been pierced. A clear break of this average would highlight a strong short-term bear threat and suggest scope for a deeper retracement. This would open 5202.00, a Fibonacci retracement. For bulls, a resumption of gains would refocus attention on the 5600.00 handle.
- A bear threat in S&P E-Minis remains present and fresh cycle lows this week reinforce current conditions. MA studies are in a bear-mode set-up and this highlights a dominant downtrend and bearish market sentiment. Sights are set on the next important support at 5499.25, the Sep 9 2024 low. Note that the short-term trend condition is oversold, a corrective bounce would allow this set-up to unwind. Firm resistance to watch is 5949.30, the 50-day EMA.
COMMODITIES: Bearish WTI Conditions Intact Despite Moderate Recovery This Week
- A bearish condition in WTI futures remains intact and the contract is trading closer to its recent lows. The latest sell-off has resulted in a breach of $70.20, the Feb 6 low. This confirmed a resumption of the downtrend that started Jan 15 and has paved the way for an extension towards $63.61 next, the Oct 10 ‘24 low. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. Key pivot resistance is $70.10, the 50-day EMA.
- Gold is trading higher this week. The trend condition is unchanged, it remains bullish and the recent pullback appears corrective. A stronger resumption of gains would refocus attention on $2962.2, a Fibonacci projection. This would also open the $3000.0 handle. On the downside, a move lower would instead suggest scope for a deeper correction and expose support around the 50-day EMA, at $2834.0. The 50-day average marks a key support.
| Date | GMT/Local | Impact | Country | Event |
| 13/03/2025 | 1230/0830 | * |  CA | Building Permits |
| 13/03/2025 | 1230/0830 | * | CA | Household debt-to-income |
| 13/03/2025 | 1230/0830 | *** |  US | Jobless Claims |
| 13/03/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 13/03/2025 | 1230/0830 | *** | US | PPI |
| 13/03/2025 | 1400/1000 | * | US | Services Revenues |
| 13/03/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 13/03/2025 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 13/03/2025 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 13/03/2025 | 1700/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 14/03/2025 | 0700/0700 | ** |  GB | UK Monthly GDP |
| 14/03/2025 | 0700/0800 | ** |  SE | Unemployment |
| 14/03/2025 | 0700/0700 | ** | GB | Trade Balance |
| 14/03/2025 | 0700/0700 | ** | GB | Index of Services |
| 14/03/2025 | 0700/0700 | *** | GB | Index of Production |
| 14/03/2025 | 0700/0800 | *** |  DE | HICP (f) |
| 14/03/2025 | 0700/0700 | ** | GB | Output in the Construction Industry |
| 14/03/2025 | 0730/0730 | GB | DMO calendar for first 3 weeks of FY 25/26 confirmed | |
| 14/03/2025 | 0745/0845 | *** |  FR | HICP (f) |
| 14/03/2025 | 0800/0900 | *** |  ES | HICP (f) |
| 14/03/2025 | 0900/1000 | * |  IT | Industrial Production |
| 14/03/2025 | 0930/0930 | GB | BoE/Ipsos Inflation Attitudes Survey | |
| 14/03/2025 | - | *** |  CN | New Loans |
| 14/03/2025 | - | *** | CN | Money Supply |
| 14/03/2025 | - | *** | CN | Social Financing |
| 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 |
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