ASIA STOCKS:  A Poor End to the Week as Tariffs Weigh Heavy

• Tsys futures are seen a reversal following the chances of the tax cuts rising as the house passed budget targeting safety net. TU is last -01 3/8 at 103-00+, while TY is trading -05+ at 110-11.
• Cash tsys curves are trading mixed, the belly is slightly underperforming. The 2yr is +2.7bps at 4.121%, while the 10yr is trading +2.9bps at 4.323%. The 2s10s is trading little changed at 20bps.
• House Republicans narrowly passed a budget blueprint, enabling potential extension of Trump’s 2017 tax cuts with $4.5t in tax reductions and a $4t debt limit increase, despite adding to deficits. The plan, which overcame internal resistance with Trump’s last-minute support, proposes $2t in spending cuts, predominantly to safety-net programs like Medicaid, though it faces Senate revisions and Democratic opposition for favoring the wealthy while slashing aid for the poor.
• Projected rate cuts through mid-2025 have cooled vs Tuesday levels (*) as follows: Mar'25 steady at -0.7bp, May'25 at -5.6bp (-8.2bp), Jun'25 at -19.6bp (-20.7bp), Jul'25 at -27.1bp (-28.6bp).
• Atlanta Fed President Raphael Bostic is scheduled to speak later today, while we also have a 7yr note auction, this follows a 2yr & 5yr auction so far this week.
• Later today, New Home Sales and building permits, then focus will turn to Nvidia's earnings.

JGB futures are stronger, +20 compared to the settlement levels, but well off the session’s best levels.

• Cash US tsys are 2-3bps cheaper in today’s Asia-Pac session after yesterday’s solid gains. Earlier, the passage of the budget blueprint by the US House provided an upward backdrop for yields.
• "The House budget would pave the way for $4.5 trillion in tax cuts — about enough to pay for extending the expiring cuts but not enough to also cover Trump’s campaign promises for additional tax relief. The measure would add to the budget deficit despite calling for $2 trillion in overall spending cuts over ten years." (per BBG)
• "The Bank of Japan is likely to keep raising interest rates to 1% if the results of annual wage talks due mid-March come out as strong as last year, says Mizuho Securities economist Ryosuke Katagi." (per DJ via BBG)
• Cash JGBs are 1-3bps richer across benchmarks. The benchmark 10-year yield is 1.8bps lower at 1.355% versus the cycle high of 1.466% set last week.
• Swaps rates are ~1bp higher. Swap spreads are wider.
• Today, the local calendar will see Leading and Coincident Indices later.
• Tomorrow, the local calendar is empty apart from 2-year supply. Tokyo CPI is due on Friday alongside Retail Sales data. 

• Having hit new highs of US$2,956.19 overnight gold opened at $2,914.76 in Asia trading and rallied.
• The rally quickly ran out of steam as gold was unable to reach last night’s highs and peaked at $2,930.09.
• It subsequently fell back below where it opened to $2,913.76.
• In the US overnight, risk off sentiment prevailed as equities trended lower as data showed the US consumer confidence was weaker and the Dallas Fed Services lower giving a bid to US Treasuries with futures back at mid -December highs.
• Weak data suggesting rate cuts usually drives gold higher but as bullion continues to hit new highs (up over 10% year to date) it is not surprising that some profits are being booked.
• The key drivers for gold remain positive with a deteriorating geopolitical environment due to the threat of tariffs, potential rate cuts and Central Banks resuming gold purchases.