ECB: Bank Took Note of Unusual Market Reaction to Trump Tariffs
The bank also noted, in detail, the market reaction to Trump's tariff volleys in April: ""it was felt that the tariff tensions did not seem to come with the inflationary effects that many members had previously associated with such an event, at least not over the short to medium-term horizons."
- On bonds and rate markets: "US government bond yields had risen at the same time as the US equity sell-off, which was highly unusual because Treasury bonds normally benefited from safe-haven flows. US ten-year asset swap spreads had likewise risen sharply, which was also unusual. Meanwhile, Bund yields had declined and the spread between the Bund and overnight index swap (OIS) rates had narrowed substantially as German government bonds had continued to perform their role as a safe-haven asset."
- On the currency: "the euro was seemingly turning into more of a safe-haven currency and was subject to revaluation pressures."
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US TSY FUTURES: BLOCK: Jun'25 5Y Buy
- +6,500 FVM5 108-07.25, buy through 108-07 post time offer at 0714:53ET, DV01 $416,000. The 5Y contract trades 108-07.25 last (-4.25)
FOREX: Latest Analyst Views on US Dollar
- *CIBC highlight that concerns over the Fed’s independence, Trump tariffs, and heightened uncertainty into earnings season has the market withdrawing capital from the US. They point out the DXY no longer sees haven demand which they believe can persist for some time. CIBC remain sellers of any near-term appreciation in the greenback with their favourite trades being long EUR/USD on dips towards the 1.14 level, and being short USD/JPY on rallies towards 142.
- *MUFG note the triple selling of the US dollar, US bonds and US equities highlights the further undermining of investor confidence in US assets. It fits with their view that the risk premium that has been priced into the USD since the announcement of reciprocal tariff plans is unlikely to diminish over the near-term. The topic of Fed independence under Trump’s presidency is not new but his comments last week were the clearest yet on how unhappy Trump is, leaving the greenback vulnerable to further S-T weakness.
- *SocGen say it’s hard to avoid the conclusion that imposing draconian import tariffs on goods which have no easy domestic substitutes in the US, will be inflationary (and ultimately, bad for growth). Added to political influence over the Fed and unsustainably vast international investment imbalances, and we have a recipe for a significant dollar fall, according to SG.
- Positioning, speed of movement, the lack of attraction of most of the alternative currencies means it won’t happen in a straight line. However, SG highlight this is the biggest USD short against the euro and yen, and suggest the dollar should be sold on rallies.
STIR: Short Cover Most Prominent In Front End Of SOFR Futures On Monday
OI data points to net short cover dominating in most SOFR futures contracts through SFRU7 on Monday, with a mix of net short setting and long cover then seen through from SFRZ7 through the blues.
| 21-Apr-25 | 17-Apr-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRH5 | 1,116,798 | 1,126,370 | -9,572 | Whites | -28,882 |
SFRM5 | 1,226,691 | 1,244,933 | -18,242 | Reds | -5,766 |
SFRU5 | 968,963 | 964,124 | +4,839 | Greens | +3,143 |
SFRZ5 | 1,089,563 | 1,095,470 | -5,907 | Blues | -222 |
SFRH6 | 673,678 | 672,912 | +766 |
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SFRM6 | 678,426 | 677,790 | +636 |
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SFRU6 | 663,405 | 666,771 | -3,366 |
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SFRZ6 | 851,678 | 855,480 | -3,802 |
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SFRH7 | 610,084 | 611,642 | -1,558 |
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SFRM7 | 556,858 | 551,133 | +5,725 |
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SFRU7 | 365,045 | 362,132 | +2,913 |
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SFRZ7 | 395,469 | 399,406 | -3,937 |
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SFRH8 | 252,277 | 252,810 | -533 |
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SFRM8 | 179,508 | 181,140 | -1,632 |
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SFRU8 | 134,403 | 135,428 | -1,025 |
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SFRZ8 | 153,407 | 150,439 | +2,968 |
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