JGBS: 30-year JGB Yields At Highest Since 2004; Supplementary Budget Eyed
Long-end JGBs have notably underperformed over the pas ~3 hours, with 30-year yields now 13.5bps higher on the session at 2.849% - the highest level since 2004. We haven’t seen any other obvious headline triggers to explain the upward yield pressure since 4:30BST. The price action may represent a delayed reaction to a Friday report from Kyodo News (via BBG) that PM Ishiba will request a supplementary budget draft this week to respond to US tariffs and higher prices.
- The 10s30s curve has steepened to 146bps, the highest since 2006 (which is the start point of BBG data).
- Local media have reported that Economic Revitalization Minister Akazawa will visit the US for trade negotiations between April 16-18 this week.
- Over the weekend, the US exempted some consumer electronics from its reciprocal tariffs. Japan is an obvious beneficiary of this move, with the Nikkei up 1.2%. However, Commerce Secretary Lutnick and President Trump have since played down this decision as a meaningful reprieve, noting that these goods will be affected by separate levies on a basket of goods including semiconductors. Trump has said that these tariffs may be announced “over the next week”.
- (MNI) The BoJ will manage monetary policy appropriately to achieve the 2% price target sustainably and stably, Governor Kazuo Ueda told lawmakers Monday. The BoJ will examine the future economy, prices and financial markets without precondition, he added.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
