USDJPY TECHS: Bear Leg Extension

April's Beige Book portrayed an economy in which economic activity was relatively little changed from the previous edition in February, but with increasing uncertainty over government policy causing businesses' outlooks to deteriorate. Likewise, inflation pressures were seen as little changed (still "modest" / "moderate" for the most part) vs prior, but the outlook is for increasing upside to input prices albeit with questionable ability to pass them through to buyers.

Economic Activity: "Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports. Just five Districts saw slight growth, three Districts noted activity was relatively unchanged, and the remaining four Districts reported slight to modest declines...The outlook in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose."

• Prior edition (Feb): "Overall economic activity rose slightly since mid-January. Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions."

On a district-by-district Fed basis, the Beige Book anecdotes suggest that even for those regions posting growth, businesses' outlooks had deteriorated significantly. Below are the 12 regional Feds sorted by categories of economic activity, plus any notable commentary:

• Increased slightly (5 districts): Atlanta, Boston ("the outlook became more pessimistic on tariff-related concerns"), Richmond ("grew slightly...despite some pockets of weakness tied to federal staffing and contract spending"), Kansas City ("but expectations about business activity and consumer spending weakened considerably"), Dallas ("slowed to a slight pace...Outlooks deteriorated as heightened uncertainty surrounding domestic and trade policy hindered firms' ability to plan").
• Contracted modestly/"lower" (4): New York ("heightened uncertainty weighed on businesses and consumers"), Philadelphia ("sentiment fell, and firms grew less optimistic about future growth amid rising economic uncertainty"), Minneapolis, San Francisco ("slowed slightly...the economic outlook worsened materially").
• Flat/unchanged/little changed (3): Chicago, Cleveland ("contacts expected activity to remain flat in the months ahead"), St Louis ("the outlook has slightly deteriorated. ...Contacts expressed a lot of uncertainty and an elevated effort in estimating the impact of tariffs and ways to reduce cost increases and supply disruptions")

Bearish rate hedging with underlying futures at/near lows, projected rate cuts continue to retreat from this morning's levels (*) as follows: May'25 at -2.1bp (-2.7bp), Jun'25 at -15.1bp (-17.7bp), Jul'25 at -33.6bp (-36.9bp), Sep'25 -51.6bp (-55.2bp).

• -7,000 SFRM5 95.87 calls, 9.5 post Beige Book
• +10,000 SFRK5 95.68/95.75 put spds, 0.75, Pre Beige Book
   

Treasury futures have retreated to session lows -- nearing early overnight levels, on latest downbeat Beige Book data. 

• Jun'25 10Y currently -5.5 at 110-20 after climbing to intraday high of 111-18.5 on WSJ China tariff story this morning. Curves retain flatter profiles, but off lows: 2s10s -5.517 at 52.448 (46.527 low), 5s30s -7.023 at 77.371.
• Cross asset: BBG US$ index climbing +6.62 at 1228.24; stocks firmer but off highs: S&P eminis +110.25 at 5425.0