NETHERLANDS: Foreign Min Meets w/Chinese Counterpart, Discuss Trade & Chips
May-22 10:53
(MNI) London - Following a meeting in Beijing between Chinese Foreign Minsiter Wang Yi and his Dutch counterpart Caspar Veldkamp, a Chinese Foreign Ministry Statement says that the two countries "agreed to maintain close exchanges, deepen practical cooperation [...] expand people-to-people exchanges, and promote the steady development of the open and pragmatic comprehensive cooperative partnership".
- Notably, the statement says the two "discussed bilateral trade concerns and agreed to maintain close communication on cooperation in various fields, including semiconductor technology, through existing channels."
- The Netherlands has been at the centre of a significant geopolitical tussle between the US and China regarding lithography equipment. The Netherlands' ASML, which makes equipment that in turn is used to make high-tech chips, has been barred from selling its most advanced equipment to China under pressure from Washington, D.C. As SCMP notes, Dutch exports to China fell notably earlier this year as the firm cleared a backlog of orders on lower-end equipment.
- As NL Times noted last week, "The Cabinet fears that the Trump administration will push to even further restrict the chip machine maker’s opportunities to sell its products to China,[...]. And a blow to ASML is a blow to the Dutch economy."
- China and the Netherlands "commit to upholding free trade and the multilateral trading system with the WTO at its core, emphasizing the importance of open trade based on rules and a fair global competition environment, as well as the contribution of trade to economic growth."
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US TSYS: Bear Flatter With 2Y Supply And Fedspeak Watched
Apr-22 10:51
- Treasuries trade bear flatter as investors continue to weigh US President Trump’s latest pressure on the Fed to cut rates yesterday. It adds to the mix of the front end being under pressure from further gains for crude oil futures and $69bn of 2Y supply later on.
- Earnings are increasingly of note this week with tariff impacts eyed, including Tesla, Verizon and Lockheed Martin today before Boeing, IBM and Philip Morris tomorrow.
- Cash yields are 0.5bp to 4.5bp higher on the day, with 2s leading the increases.
- It sees some pulling back from yesterday’s latest steepening, including 2s10s at 62bp (-3bp) vs above 66bp yesterday.
- TYM5 has recently touched lows of 110-17 (-08+), back to levels last seen on Apr 15 amidst modest volumes of 280k.
- The pullback from Thursday’s 111-17+ supports the notion that prior gains were corrective, with support seen at 110-15 (Apr 15 low) before a bear trigger at 109-08 (Apr 11 low).
- Data: Philly Fed non-mfg Apr (0830ET), Richmond Fed mfg Apr (1000ET)
- Fedspeak: Jefferson (0900ET), Harker (0930ET), Kashkari (1340ET), Barkin (1430ET) and Kugler (1800ET) – see STIR bullet
- Coupon issuance: US Tsy $69B 2Y Note auction - 91282CMY4 (1300ET)
- Bill issuance: US Tsy $70B 6W bill auction (1130ET)
US TSY FUTURES: BLOCK: Jun'25 10Y Ultra Bond
Apr-22 10:43
- 2,463 UXYM5 112-18, may be a sale with a fair amount of two-way trade at the post time of 0625:10ET, DV01 $218,000. The contract trades 112-17.5 (-8.5) last
STIR: Senior FOMC Officials In The Spotlight
Apr-22 10:37
- Fed Funds implied rates sit within yesterday’s Easter Monday holiday-thinned ranges as markets assess the latest of US President Trump’s attempts at pressuring the Fed to cut interest rates.
- Cumulative cuts from 4.33% effective: 3.5bp May, 18.5bp Jun, 41bp Jul, 60bp Sep and 91bp Dec.
- Yesterday’s timely MNI policy team exclusive with Lev Menand looked at options away from just Fed Chair Powell’s role (see Fed Independence Facing Imminent Risk – Menand, published 1613ET).
- That sees today’s various scheduled Fedspeakers in particular focus in an another quiet data docket, with messages either of continued caution against cutting rates too soon or a more dovish tone both of note. We imagine permanent voters Jefferson and Kugler will be watched most closely, although Kugler is late on.
- 0900ET – Vice Chair Jefferson (permanent voter) on economic mobility and the dual mandate (text only). He said Apr 3 that there was no need to hurry to adjust rates and that is was crucial to assess the full effect of Trump administration changes. That said, he noted growth was solid but saw signs of slowing and that persistent uncertainty may constrain the economy.
- 0930ET – Harker (retiring June) on economic mobility and regional economies (fireside chat)
- 1340ET – Kashkari (’26 voter) at Chamber of Commerce Global Summit (Q&A only)
- 1430ET – Barkin (non-voter) fireside chat at innovation summit (Q&A only)
- 1800ET – Gov. Kugler (permanent voter) on monetary policy transmission (text + Q&A). She said Apr 7 that inflation was now the more pressing issue with regards to tariffs and that the Fed needs to make sure it doesn’t rise. She warned the tariff impact should be consequential.
