MNI ASIA MARKETS ANALYSIS: Auto Tariffs Drive Risk-Off Move

MNI (NEW YORK) - HIGHLIGHTS:

• Dollar Gains As Auto Tariff Headlines Weigh On Equities
• Gilts Resolve Stronger After UK Spring Statement/Gilt Remit
• Crude Climbs, Copper Extends Gains Amid Tariff Threat

US TSYS: Bear Steepening With Trump Auto Tariffs In Focus

The Treasury curve bear steepened Wednesday, with UK developments and US headlines at the fore.

• Treasuries started the session on the front foot, helped in part by European developments including softer-than-expected UK CPI. Later, UK developments would come to the fore again as the government fiscal announcement first brought Gilts (and Treasuries alongside) first lower and then back higher.
• Headlines emerging through the day that President Trump planned an imminent announcement on auto tariffs (confirmed to be announced by the White House for 4pm ET Wednesday) weighed on risk appetite, with major equity aggregates down 1+% and the US dollar index rising to 3 week highs. That in turn helped Treasuries off late morning lows.
• The 5Y Treasury Note auction was the weakest since at least October, tailing 0.5bp and drawing a slightly negative reaction in the broader Treasury market.
• In a limited data slate, durable goods orders/shipments surprised to the upside, another positive on the "hard" data front compared with the softer survey data seen elsewhere.
• Regional Fed presidents Musalem and Kashkari echoed the recent FOMC theme of patience in making any future rate decisions, amid high levels of govenrment policy uncertainty.
• Latest cash levels: The 2-Yr yield is down 0.9bps at 4.0043%, 5-Yr is up 1.1bps at 4.0789%, 10-Yr is up 2.1bps at 4.3345%, and 30-Yr is up 2.5bps at 4.6833%. The Jun 25 T-Note future is down 5.5/32 at 110-18.5, having traded in a range of 110-12.5 to 110-23.
• Thursday's data slate is on the heavy side, with the third reading of Q4 GDP, Feb trade balance, and initial jobless claims among other items on the docket, while we also hear from Boston Fed's Collins and Richmond's Barkin.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

US TSYS/OVERNIGHT REPO: SOFR Pressures Pick Up Early Ahead Of Quarter-End

Secured rates have begun to pick up ahead of month/quarter end, with SOFR up 2bp to 4.33% Tuesday - highest since March 10. That puts the spread to effective Fed funds also at zero for the first session since that date (it had been trading below EFFR in the interim - the latter printed 4.33% as usual on Tuesday).

• That said, the uptick was something of a surprise given large Treasury bill redemptions on Tuesday which should have put a lid on secured rates.
• Further Tbill paydowns Thursday likewise should help contain rates somewhat but will almost certainly be further increases late this week and on Monday's quarter-end date.
• Wrightson ICAP for one pencils in SOFR of 4.47% on Mar 31, which would be the highest since Jan 1 (ie year/quarter/month-end).

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.33%, 0.02%, $2460B
* Broad General Collateral Rate (BGCR): 4.31%, 0.01%, $966B
* Tri-Party General Collateral Rate (TGCR): 4.31%, 0.01%, $939B

New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume:  $107B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume:  $301B
 

US TSYS/OVERNIGHT REPO: ON RRP Takeup Hits 2025 Highs With Quarter-End Ahead

Takeup of the Fed's overnight reverse repo facility picked up the most in a week Wednesday, by $26.6B, to the highest level this year so far of $241.4B.

• Takeup of ON RRP is likely to pick up even more sharply at the end of this week and early next, amid the usual quarter-end dynamics.

US: SOFR FIX - 26/03/25

SOFR FIX - Source BBG/CME

• 1M 4.32719 0.00556
• 3M 4.30267 -0.00014
• 6M 4.22358 0.00791
• 12M 4.06494 0.00862

US SOFR/TREASURY OPTION SUMMARY

Wednesday's U.S. rates options flow included:

* SFRZ5 95.62/95.37ps, bought for 1.75 in 60k total (pit and screen).
* SFRM5 95.50p, bought for half in 20k.

US STOCKS: Mega Caps Weigh, Banks Look Set To Miss Out On Record Streak

• S&P 500 futures have seen a further step lower and have reversed more than half of the week’s increase that had at one point been a 2% intraweek climb on at the time hopes of pared back tariff plans.
• At 5767 (-1.0%), it has pulled back from yesterday’s high/first resistance at 5837.25 but remains some way above support 5650.75 (Mar 18 low). Further support is then seen at a bear trigger of 5559.75 (Mar 13 low).
• Nvidia (-5.6%) is a major downward driver here, back close to session lows seen after the FT reported China is raising restrictions on chips. Bloomberg's write-up: "According to the FT, the government is encouraging Chinese groups to build data centers with chips that meet tighter energy requirements not satisfied by Nvidia's technology. Its H20 chip, a processor originally designed to satisfy US export controls put in place on China, would not be permissible under the new rules."
• It’s not the only “Magnificent Seven” member under pressure today though, with Tesla (-5.2%) plus worthy mentions for Alphabet (-1.9%), Meta (-2.0%) and Amazon (-1.4%). Carmaker stocks are also down sharply on an imminent auto tariff announcement by President Trump (4pm ET).
• This backdrop unsurprisingly sees IT (-2.3%), communication services (-1.6%) and consumer discretionary (-1.5%) as clear losers for the day, whilst consumer staples (+1.1%), energy (+0.7%) and utilities (+0.5%) gain.
• Note that looking at the broader KBW banking index, it has currently dipped to -0.4% on the day but were it to recover back into the green come the close it would notch up a ninth consecutive gain for a record going back to 2006.
• E-mini comparison: Nasdaq 100 -1.7%, S&P 500 -1.0%, Russell 2000 -1.0% and Dow Jones -0.2%. 

BONDS: EGBs-GILTS CASH CLOSE: Gilts Resolve Stronger After Spring Statement

Gilt yields resolved lower after volatile trading around the UK government's highly-anticipated fiscal statement, outperforming Bunds in a bull flattening move.

• Core instruments strengthened in early trade, with Gilts benefiting from a softer-than-expected inflation report.
• Gilt yields jumped to session highs on the Spring Statement release, but rebounded sharply after the release of the Gilt Remit showed a slightly lower than expected total (GBP299.2B vs. median GBP303B). The UK curve would close bull flatter.
• Core FI rallied through the cash close, as the White House confirmed President Trump would announce auto tariffs later in the day.
• ECB commentary was mixed but not unexpected given the sources:  dove Centeno said he saw no reason not to cut in April; hawk Holzmann conversely said he wouldn't vote to cut rates in April.
• The German curve bull steepened; periphery EGB spreads closed slightly wider of Bunds following a late risk-off move.
• Thursday's calendar is lighter, with appearances by BoE's Dhingra and multiple ECB officials, Spanish retail sales and ECB monetary aggregates data, and the Norges Bank decision bearing attention. 

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.8bps at 2.119%, 5-Yr is down 1.3bps at 2.414%, 10-Yr is down 0.3bps at 2.795%, and 30-Yr is up 0.6bps at 3.137%.
• UK: The 2-Yr yield is down 1.1bps at 4.29%, 5-Yr is down 1.6bps at 4.37%, 10-Yr is down 2.5bps at 4.728%, and 30-Yr is down 6bps at 5.309%.
• Italian BTP spread up 0.6bps at 110.2bps / Spanish up 0.2bps at 62.5bps
   

EUROPE OPTIONS: Call Spread Buying Resurfaces In Euro Rates

Wednesday's Europe rates/bond options flow included:

• ERJ5 97.75/97.68ps sold at 1 in 8k
• ERM5 97.9375/98.00cs, bought for 2 in 10k
• ERM5 98.0625/98.12cs, bought for half in 3k
• ERZ5 97.875/97.625/97.375 put fly, paper pays 4.75-5 on 16k
• SFIU5 96.00/96.65/96.80 1x3x2 call fly 6K sold at 8.5

FOREX: EURUSD Slides Further Below 1.08 as Tariff Headlines Weigh

• Headlines suggesting that President Trump is preparing a statement on automotive import tariffs for Wednesday afternoon have weighed on major equity indices, in turn boosting the USD index to a three-week high. Specific headlines regarding the EU suggesting that its top trade negotiator expects President Trump to hit the bloc with tariffs of about 20% next week have also dampened sentiment for the single currency.
• As such, EURUSD has slipped further below 1.0800, and is notably tracking below the 20-day exponential moving average for the first time since March 03. This threatens a deeper pullback for the pair, potentially towards more significant support at 1.0631, a key short-term pivot level.
• In similar vein, GBPUSD trades on the backfoot and is below 1.29, however, sterling’s underperformance is mainly due to a softer set of inflation data from the UK, that prompted an early shunt lower for cable. The Spring Statement from Chancellor Reeves had little effect overall, as GBPUSD consolidates 0.42% losses as we approach the APAC crossover.
• Price action narrows the gap to firm support at 1.2869, the 20-day EMA. A sustained clearance of this level would signal scope for a deeper retracement towards the 50-day EMA, at 1.2731.
• AUDJPY remains higher on the session, but the latest equity weakness is helping its key 50-day EMA resistance cap the topside for the cross. Today’s high of 95.19 matched closely with the average, which has proved significant in recent months, having not closed above it since January.
• The firmer dollar theme is trumping the softer sentiment for equities, emphasised by USDJPY rising 0.42% to 150.55. The focus continues to be on 150.95, which represents both the recovery high and the 50-day EMA, a break above which would be the latest counter-trend signal and could signal scope for a stronger rally.
• US final GDP, weekly jobless claims and pending home sales highlight a relatively light economic calendar on Thursday.

OPTIONS: Expiries for Mar27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0750(E1.5bln), $1.0770-90(E719mln), $1.0800(E2.0bln), $1.0820-25(E1.4bln), $1.0850-65(E1.9bln)
• USD/JPY: Y150.00($684mln), Y155.00($902mln)
• GBP/USD: $1.2900(Gbp812mln)
• AUD/USD: $0.6220(A$717mln), $0.6450(A$771mln)
• USD/CNY: Cny7.2850($671mln)

EQUITY TECHS: E-MINI S&P: (M5) Retracement Mode Remains Intact

• RES 4: 5970.87 61.8% retracement of the Feb 19 - Mar 13 bear leg 
• RES 3: 5924.59 50-day EMA 
• RES 2: 5864.25 Low Jan 13 and a recent breakout level
• RES 1: 5837.25 High Mar 25                   
• PRICE: 5818.75 @ 13:50 GMT Mar 26 
• SUP 1: 5650.75/5559.75 Low Mar 18 / 13 and the bear trigger                 
• SUP 2: 5483.50 2.00 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
• SUP 3: 5396.00 2.236 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
• SUP 4: 5341.87 2.382 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing          

S&P E-Minis are trading at their recent highs. The trend condition is bearish and the latest recovery appears corrective. MA studies remain in a bear-mode set-up, highlighting a dominant downtrend. However, this week’s gains have resulted in a breach of the 20-day EMA. This signals scope for a continuation higher near-term - towards 5864.25, the Jan 13 low. A reversal lower would refocus attention on 5559.75, the Mar 13 low and bear trigger.

COMMODITIES: Crude Climbs, Copper Extends Gains Amid Tariff Threat

• Crude prices are trading higher today amid signs of rising tensions in the Middle East. Supply-side risks remain from increased US sanctions against Iran and tariff threats for countries importing Venezuelan oil.
• WTI May 25 is up by 1% at $69.7/bbl.
• Despite recent gains, a bearish trend condition in WTI futures remains intact. However, a key pivot resistance at $69.14, the 50-day EMA, has been pierced. A clear breach of this hurdle would strengthen a bullish theme and open $70.98, the Feb 25 high.
• For bears, a reversal lower would expose the bear trigger at $64.85, the Mar 5 low.
• Meanwhile, copper has risen further today amid reports that US tariffs on copper imports could be coming earlier than expected, within the next several weeks.
• Copper is currently up by 0.5% at $523/lb, having reached a record high at $537 earlier in the session.
• While copper prices are technically overbought, history shows they can tolerate extended periods of stronger prices for a longer duration than the current rally.
• From a technical perspective, a bull cycle in copper futures remains in play, with price testing resistance at $537.30, the 2.5 projection of the Jan 2 - 17 - Feb 3 price swing earlier. A break of this level would open round number resistance at $540 next.
• Spot gold is unchanged today at $3,019/oz, as the yellow metal consolidates below last week’s record high at $3,057.
• A clear uptrend in gold remains intact, with sights on $3,079.2 next, a Fibonacci projection.

DATA/EVENTS CALENDAR

Date	GMT/Local	Impact	Country	Event
27/03/2025	-		NO	NorgesBank Meeting
27/03/2025	0830/0830		GB	BOE's Dhingra on inflation targeting in the UK post pandemic period
27/03/2025	0900/1000	***	NO	Norges Bank Rate Decision
27/03/2025	0900/1000	**	EU	M3
27/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
27/03/2025	-		FR	Insee publishes General Govt balance
27/03/2025	1230/0830	*	CA	Payroll employment
27/03/2025	1230/0830	***	US	Jobless Claims
27/03/2025	1230/0830	**	US	WASDE Weekly Import/Export
27/03/2025	1230/0830	***	US	GDP
27/03/2025	1230/0830	**	US	Advance Trade, Advance Business Inventories
27/03/2025	1300/1400		EU	ECB's De Guindos at 2025 IIF European Summit
27/03/2025	1400/1000	**	US	NAR Pending Home Sales
27/03/2025	1430/1030	**	US	Natural Gas Stocks
27/03/2025	1500/1100	**	US	Kansas City Fed Manufacturing Index
27/03/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
27/03/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
27/03/2025	1700/1300	**	US	US Treasury Auction Result for 7 Year Note
27/03/2025	1740/1840		EU	ECB's Schnabel lecture on MonPol Transmission
27/03/2025	1805/1905		EU	ECB's Lagarde prerecorded message for Women in Finance conference
27/03/2025	1900/1500	***	MX	Mexico Interest Rate
27/03/2025	2030/1630		US	Richmond Fed's Tom Barkin
27/03/2025	2030/1630		US	Boston Fed's Susan Collins
28/03/2025	2330/0830	**	JP	Tokyo CPI