MNI US OPEN - Yields at New Cycle Highs as Bullard Ups Ante

NEWS:

FED (Bloomberg): Federal Reserve Bank of St. Louis President James Bullard said the central bank needs to move quickly to raise interest rates to around 3.5% this year with multiple half-point hikes and that it shouldn’t rule out rate increases of 75 basis points. “More than 50 basis points is not my base case at this point,” Bullard said in a virtual presentation to the Council on Foreign Relations on Monday, adding the Fed under Alan Greenspan did such a hike in 1994 leading to a decade-long expansion. “I wouldn’t rule it out, but it is not my base case here.”

G7 (MNI):Virtual Leaders' Call On Ukraine Takes Place This Afternoon
US President Joe Biden has organised a virtual G7 leaders call to take place this afternoon European time (no set time yet). As well as the leaders of G7 nations, NATO Secretary-General Jens Stoltenberg and European Commission and Council Presidents Ursula von der Leyen and Charles Michel will be on the call. In recognition of their major efforts in assisting Ukrainian refugees and providing a base of operations for NATO support efforts, the leaders of Poland and Romania have also been invited onto the call.

FRANCE (MNI): Macron Lead Stabilises As Campaign Enters Final Week
With less than a week to go until the second round of the French presidential election, incumbent Emmanuel Macron's narrow lead has stabilised and in some cases grown in recent polling.

• Cluster17 poll: Presidential run-off election: Macron (EC-RE): 53.5% (+0.5), Le Pen (RN-ID): 46.5% (-0.5), +/- vs. 13 - 14 April 2022. Fieldwork: 17 - 18 April 2022. Sample size: 2,793
• Political betting markets have remained largely stable in recent days, with data from Smarkets showing bettors giving Macron an 89.2% implied probability of winning compared to a 10.9% implied probability for right-wing Rassembelement National leader Marine Le Pen.
• Prior to the 10 April first round, Macron's implied probability of re-election stood at 74.6% to Le Pen's 23.8%.
• Major focus on the lengthy presidential debate taking place at 2100CET (1500ET, 2000BST) on Wednesday 20 April. A poor performance from Le Pen in 2017 contest was seen as damaging to her prospects of election. Looking at polls she will be relying on a strong showing to overcome Macron's lead.

RUSSIA/UKRAINE (The Times): President Zelensky of Ukraine said last night that the long-expected second phase of Russia’s war on his country had begun. Russian tanks and artillery, which had been gathering since their withdrawal from Kyiv and northern Ukraine last month, opened fire from the breakaway regions of Donetsk and Luhansk in the east. The Ukrainian authorities said their troops had managed to “hold the line”, though they admitted the loss of the small town of Kreminna in Luhansk.

RUSSIA/ENERGY (Bloomberg): European natural gas extended its decline to the lowest level since the start of Russia’s war in Ukraine, amid warmer weather and signs from the Kremlin that payment for the fuel in rubles isn’t expected until next month. Benchmark Dutch gas futures fell as much as 12% to 84 euros per megawatt hour -- the lowest level since Feb. 23, the day prior to the Russian invasion -- before paring some of those losses. The front-month contract settled 9.2% lower on April 14, ahead of the Easter holidays.

US/TAIWAN (BBG): Taiwan Minister-Without-Portfolio John Deng will lead a delegation to attend the Commerce Department’s Select USA Investment summit, which will take place June 26 to 29 in Maryland, Taipei-based Central News Agency reports, citing cabinet official.

RBA (MNI): RBA Says Rate Rise "Brought Forward"
Higher inflation and wages growth have "brought forward the likely timing" of a rise in official interest rates, according to the minutes the April meeting of the board of the Reserve Bank of Australia released on Tuesday. The minutes show the central bank expects further increases in inflation, with measures of underlying inflation in the March quarter "expected to be above 3%."

FOREX: USD/JPY Extends Winning Streak to 13 Sessions

• The weakness in JPY markets extended early Tuesday, with USD/JPY breaking comfortably back above the Y128.00 handle as the uptrend extends. This pushes the winning streak in the pair to 13 consecutive sessions, and narrows the gap with Y130 - a level last crossed in 2002.
• The run higher in the pair follows an appearance from Fed's Bullard - a notable hawk in Fed policy-making - who mentioned the possibility of a 75bps rate hike if required. His preference is for rates to reach 3.50% this year, but rate rises above 50bps at each interval are not his base case for the time being.
• A run-up in US yields has followed this morning, putting the US 10y yield at the highest levels since December 2018, but this has not been accompanied by dollar strength, with the currency among the poorest performers of the day.
• AUD is faring better, with AUD/USD erasing Monday's modest decline, with the pair circling just below $0.7400 resistance.
• Focus turns to US housing starts and building permits data as well as an appearance from Fed's Evans, who speaks at the Economic Club of New York. Earnings season continues, with Johnson & Johnson, Netflix and IBM all on the docket.

BOND SUMMARY: Futures Plummet

• A busy morning session for Govies, as Desks return from the Easter Bank Holiday.
• Bonds plummeted across the board, to push yields at new multi year highs.
• Fed Bullard repeated that he was in favour of a 50bps hike, also ECB Holzmann's comment from Friday, that the Depo rate should be raised by 50bps in Fall, made the round again this morning.
• Longs in Futures capitulated, and Bund tested above 0.90% in Yield.
• Peripheral spreads are all tighter against the German 10yr, with Greece in the lead by 2.4bps.
• Gilt led the way lower (Yield higher), and plummeted, to test the next psychological upside yield level at 2.00%, printed a 1.99% high, which has so far held on receiving interest.
• US treasuries followed through, with 10yr yield breaking above 2.90%, now at 2.888% at the time of typing.
• Looking ahead, there are no tier 1 data for today, and early focus for Europe will be on the German Bobl supply.
• Speakers, include Fed Evans, and SNB Jordan.
• Earning season continues, with Halliburton, J&J, Lockheed, and after markets, Netflix and IBM

EQUITIES: Stocks Lower as Yields Run to New Cycle Highs

• Japan's NIKKEI 225 closed higher by 185.38 pts or +0.69% at 26985.09 and the TOPIX up 15.62 pts or +0.83% at 1895.7. China's SHANGHAI closed down 1.495 pts or -0.05% at 3194.029 while the HANG SENG ended 490.32 pts lower or -2.28% at 21027.76.
• The German Dax trades lower by 140.81 pts or -0.99% at 14032.88, FTSE 100 down 33.32 pts or -0.44% at 7584.66, CAC 40 down 73.66 pts or -1.12% at 6521.47 and Euro Stoxx 50 down 37.23 pts or -0.97% at 3810.4.
• Dow Jones mini down 30 pts or -0.09% at 34297, S&P 500 mini down 7.25 pts or -0.17% at 4381.5, NASDAQ mini down 46 pts or -0.33% at 13869.

COMMODITIES: Crude Retraces Sizeable Monday Gains

• WTI Crude down $1.57 or -1.45% at $106.54
• Natural Gas down $0.24 or -3.06% at $7.58
• Gold spot down $0.42 or -0.02% at $1979.2
• Copper down $1.85 or -0.38% at $480.4
• Silver up $0 or +0% at $25.8715
• Platinum up $3.13 or +0.31% at $1018.88