MNI ASIA MARKETS ANALYSIS: Tsy Yields Recede Ahead GDP/PCE

HIGHLIGHTS

• Treasuries reversed early losses, look to finish near late Wednesday highs as Pres Trump's cabinet meeting rekindles concerns over trade, Canada & Mexico tariffs to start April 2.
• President trump took a firmer stance on the EU, stating that the decision on tariffs on the EU is 25% and that details will be “coming soon”.
• Stocks off early highs for many of the same reasons above, focus on Nvidia earnings after the close (1620ET).
• The upcoming US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday.

MNI US TSYS: US Trade Policy Rekindles Risk-Off Sentiment

• Treasuries bounced off early session lows and look to finish near session highs, curves flatter with bonds outperforming as trade policy concerns rekindled risk-off sentiment prevalent in the first half of the week.
• Risk-off as Pres Trump cabinet meeting marks April 2 when Canada & Mexico "tariffs will go on, not all but a lot of them" , taking a firmer stance on the EU, stating that the decision on tariffs on the EU is 25% and that details will be “coming soon”.
• Tsy Jun'25 10Y futures trade at 110-28 (+10.5) after the bell, piercing resistance at 110-20, the 76.4% retracement of the Dec 3 - Jan 13 bear leg. This broadens the bullish recovery and signals scope for a climb towards the 111-00 handle, ahead of 111-22+, the Dec 3 high and a key resistance.
• New home sales fell much more sharply in January than expected, but this was more than made up for by upward revisions while building permits were revised slightly lower in January’s final reading, to 1,473k - representing a 0.6% decline rather than the initially reported 0.1% rise.
• Canadian dollar and Mexican peso have rallied as a result. USDCAD fell from 1.4360 to 1.4300, while USDMXN fell from 20.47 to 20.29 lows. EU tariff mention saw EURUSD slipping from key resistance around 1.0530 to 1.0485 in short order.
• The upcoming US economic data with the second release for Q4 national accounts on Thursday before the January PCE report on Friday. Real GDP growth is seen confirming what was at the time a softer than expected 2.3% annualized in Q4, whilst there will also be a first estimate for real GDI growth after 2.1% in Q3. However, January’s monthly report (on Friday) is likely to show consumption got off to a much weaker start of 2025.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES
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SOFR Benchmark Settlements:

• 1M +0.00032 to 4.32384 (+0.00454/wk)
• 3M -0.00528 to 4.31324 (-0.00829/wk)
• 6M -0.01887 to 4.25155 (-0.03921/wk)
• 12M -0.05207 to 4.12001 (-0.10341/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.33% (-0.01), volume: $2.467T
• Broad General Collateral Rate (BGCR): 4.31% (-0.01), volume: $943B
• Tri-Party General Collateral Rate (TCR): 4.31% (-0.01), volume: $924B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $108B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $302B

FED Reverse Repo Operation

RRP usage climbs to an even $126.058B this afternoon from $96.000B on Tuesday. Compares to Friday, February 14 low of $58.770B - the lowest level since mid-April 2021. The number of counterparties at 37 from 36 prior.

US SOFR/TREASURY OPTION SUMMARY

Better call buying resumed after SOFR & Treasury options appeared mixed on lighter volumes Wednesday morning. Underlying futures bounced off early session lows as Pres Trump's cabinet meeting rekindled market concerns over global trade policy. Projected rate cuts through mid-2025 have firmed up from morning levels (*) as follows: Mar'25 at -0.7bp (-0.5bp), May'25 at -6.9bp (-6.4bp), Jun'25 at -21.5bp (-19.6bp), Jul'25 at -29.6bp (-27.6bp).

SOFR Options:
+8,000 0QN5/2QN5 96.50/97.00 call spd strip, 24.75-25.0
+7,000 SFRM5 95.62 puts, 1.0 
Block, +15,000 2QM5 96.75/97.00 call spds vs. 95.50/95.75 put spds, 1.0 net calls over
Block, 10,000 2QM5 96.50/96.75 call spds vs. 95.50/95.75 put spds, 4.0 net calls over
+5,000 SFRU5 98.00/99.00 2x3 call spds 2.0 ref 96.045
+5,000 SFRM5 95.62 puts 1.0 ref 95.865
+5,000 SFRJ5 95.75/96.00 1x2 call spds, 3.5 ref 95.87
+3,000 0QH5 96.18/96.31 strangle, 13.5
-5,000 SFRZ5 95.68/95.93 put spds 9.5 ref 96.18
+50,000 SFRM5 96.18/96.62 call spds .62 on legs
16,000 0QK5 96.62/96.93 call spds ref 96.295
5,000 SFRZ5 95.50/95.87 put spds ref 96.175
2,500 SFRZ5 96.12/96.37/96.62 put flys
6,500 0QH5 95.93/96.06/96.18 put flys ref 96.25 to -.235
4,000 2QJ5 96.25/96.50/96.62 broken call flys ref 96.27

Treasury Options:
Block, total 105,000 TYK5 113.5 calls, 19 vs. 110-20/0.17%
+15,000 TYK5 112 calls, 33 ref 
-6,750 USJ 119/122 call spds, 33
over -7,000 USJ5 119/122 call spds, 33 ref 117-09
-10,000 wk4 TY 111 calls, 6
4,500 TYK5 114.5 calls, 10 ref 110-18
+30,000 TYJ5 109/109.5 put spds, 9 ref 110-11.5
over 5,500 TYJ5 110.5 calls, 42 last ref 110-12
over 12,200 TYK5 110.5 calls ref 110-123,100 TYK5 106/108 put spds vs. TYM5 105/107 put spd spds
2,000 FVK5 106.75/107.5/108 broken call flys ref 107-12.75

MNI BONDS: EGBs-GILTS CASH CLOSE: Peripheries Outperform As Equities Gain

European curves traded slightly flatter Wednesday, with short-ends underperforming, and periphery / semi-core EGBs outperforming.

• An early bid in core FI alongside weaker equities, a further fall in gas prices and and a stronger US dollar faded over the course of the session as the latter recovered. The Bund rally continued after the cash close in futures as US President Trump announced 25% tariffs would be imposed on EU products.
• Data was scant either side of the Atlantic: German GfK consumer confidence fell to the lowest since April, while the IFO employment barometer suggested that job cuts continue.
• BOE's Dhingra noted that higher US tariffs on UK imports are unlikely to greatly impact UK inflation.
• Bunds outperformed Gilts across most of the respective curves, with twist flattening in both.
• Periphery EGB spreads tightened into the cash close as equities rallied. In semi-core, OATs outperformed, finishing close to the 2025 low of 70.8bp.
• The February Eurozone flash inflation round starts Thursday with Spain - MNI's preview of the round is here. We also get various Eurozone confidence indicators and the accounts of the January ECB meeting. 

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.3bps at 2.068%, 5-Yr is down 1.9bps at 2.196%, 10-Yr is down 2.5bps at 2.433%, and 30-Yr is down 2.7bps at 2.696%.
• UK: The 2-Yr yield is up 0.1bps at 4.175%, 5-Yr is unchanged at 4.182%, 10-Yr is down 0.7bps at 4.502%, and 30-Yr is down 0.8bps at 5.094%.
• Italian BTP spread down 1.8bps at 111.2bps / French OAT down 2.2bps at 71.7bps  

MNI OPTIONS: Recent Euribor Spread Buying Shifts To Selling Wednesday

Wednesday's Europe rates/bond options flow included:

• ERH5 97.625 calls ~4K given at 1.25
• ERM5 97.875/98.00/98.0625/98.1875 call condor 4K given at 4.
• ERM5 97.8125/97.6875ps 1x2, bought for 1.75 in 20k.
• ERM5 97.62/97.75cs sold at 9.75 in 6.25k.
• ERM5 97.875/98.00/98.125/98.25c condor vs 97.625/97.50ps, sold the Condor at 3.25 in 5.5k

MNI FOREX: CAD & MXN Get Late Boost on Tariff Implementation Extension

• Headlines after the European close on Wednesday have sparked currency markets into life, as President Trump has announced that tariffs on Mexico and Canada will now be implemented on April 02, later than the prior March 04 deadline.
• The extension to this deadline has provided optimism, and the Canadian dollar and Mexican peso have rallied as a result. USDCAD fell from 1.4360 to 1.4300, while USDMXN fell from 20.47 to 20.29 lows.
• Optimism has been tempered since, as markets digest the headlines. Although the extension could be seen as providing more time to negotiate broader trade deals, Trump mentioning that the US is “not stopping the tariffs” is offsetting the initial price spikes.
• In contrast, President trump took a firmer stance on the EU, stating that the decision on tariffs on the EU is 25% and that details will be “coming soon”. This prompted some volatility for the single currency, with EURUSD slipping from key resistance around 1.0530 to 1.0485 in short order. EURCAD was also sharply lower on the contradictory sentiment, trading the entire day's range in quick fashion, from 1.5095 to 1.5010 lows.
• Overall on the session, AUD and NZD have exhibited underperformance as risk sentiment continues to cautiously tread water. Additionally, lower than expected inflation data in Australia as well as potential flows related to value date month-end may have weighed on AUDUSD, which hit intra-day lows of 0.6300. Attention below here is on 0.6231, the Feb 10 low.
• GBP trades more healthily, and cable has traded back above 1.27 for the first time since December 18, keeping a bullish trend condition intact. In similar vein, EURGBP has been edging lower to levels around 0.8265 at typing. The cross continues to narrow the gap towards 0.8203, the Mar 7 ‘22 low and a lowest point of a multi-year range.
• Swiss GDP and Spanish HICP inflation cross tomorrow in Europe, before the 2nd reading of US GDP is scheduled, alongside jobless claims and durable goods data.

MNI OPTIONS: Expiries for Feb27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0400(E527mln), $1.0425-30(E900mln), $1.0440-50(E1.2bln), $1.0470-75(E1.5bln)
• USD/JPY: Y148.00-10($1.4bln), Y150.00($1.9bln), Y151.00-05($1.2bln)
• GBP/USD: $1.2685-00(Gbp619mln)
• AUD/USD: $0.6345-50(A$690mln)
• USD/CAD: C$1.4200-10($1.1bln), C$1.4325-35($733mln), C$1.4350-70($2.7bln)

MNI US STOCKS: Late Equities Roundup: Global Trade Uncertainty Sapped Early Support

• Stocks have retreated steadily from Wednesday's midday highs, apparently as President Trump's cabinet meeting rekindled trade policy uncertainty that has weighed on sentiment since last week. Major indexes are drifting off lows in late trade with the DJIA down 131.9 points (-0.3%) at 43487.73, S&P E-Minis down 1.25 points (-0.02%) at 5969, Nasdaq up 16.1 points (0.1%) at 19042.61.
• Consumer Staples and Health Care sectors continued to underperform in late trade, food makers weighing on the former with Hershey -4.28%, The Campbell's Company -4.15%, General Mills -3.72%, Mondelez International -3.70% and Archer-Daniels-Midland -3.69%.
• Managed care and product distributor companies weighed on the Health Care sector: Molina Healthcare -8.63%, Centene -7.74%, HCA Healthcare-4.63% and Henry Schein -4.46%.
• On the positive side, Information Technology and Utility sectors continued to outperform, semiconductor makers supporting the former with First Solar +9.62% after reporting a 27% revenue gain and positive guidance late Tuesday, Micron Technology +4.16%, Broadcom +3.85% and Monolithic Power Systems +2.42%. Note, NVIDIA has pared gains but still trades +2.75% ahead of this afternoon's earnings announcement (1620ET).
• Meanwhile, NRG Energy +10.60%, Vistra +6.32% and Constellation Energy +2.68% led gainers in the Utility sector.
• Earnings expected after the close: Howard Hughes Holdings, Magnite Inc, Agilent Technologies, Snowflake, Nutanix Inc, Synopsys, eBay, NVIDIA, Salesforce, Kratos Defense & Security, Paramount Global, Teladoc Health, Sweetgreen and Core Scientific.

MNI EQUITY TECHS: E-MINI S&P: (H5) Pierces Support

• RES 4: 6205.38 0.764 proj of the Jan 13 - 24 - Feb 3 price swing    
• RES 3: 6200.00 Round number resistance
• RES 2: 6178.75 High Dec 6 and key resistance
• RES 1: 6069.41/6166.50 20-day EMA / High Jan 24                
• PRICE: 5959.00 @ 1457 ET Feb 26
• SUP 1: 5924.00 Low Feb 25            
• SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
• SUP 3: 5842.50 Low Jan 14
• SUP 4: 5809.00 Low Jan 13 and a reversal trigger  

The latest move down in S&P E-Minis appears corrective, however, price has breached support at 6014.00, the Feb 10 low. This exposed a key support at 5935.50, the Feb 3 low, that was pierced on Tuesday. A clear break of it would allow for a deeper retracement. MA studies are in a bull-mode condition that suggests the trend direction remains up. A resumption of gains would refocus attention on key resistance at 6178.75, the Dec 6 ‘24 high.

MNI COMMODITIES: Crude Extends Losses, Copper Rallies On Tariff Threat

• Crude markets have extended yesterday’s losses today amidst concerns around the US economy following a weak consumer confidence reading on Tuesday.
• Prospects of a peace deal between Russia and Ukraine continue to add to bearish pressure, coupled with talk that tariffs will take effect from April.
• WTI APR 25 is down by 0.2% at $68.8/bbl.
• A bearish theme in WTI futures remains intact, with next resistance seen at $67.75, the Dec 20 ‘24 low.
• Meanwhile, Henry Hub has pulled back to its lowest level since Feb 18 amid the March 25 contract expiry today and weaker demand as temperatures have recovered from last week’s cold.
• US Natgas MAR 25 is down by 6.4% at $3.91/mmbtu.
• In the metals space, copper has outperformed today, after President Trump threatened to place import tariffs on all forms of the metal.
• Copper rose to a high at $475/lb early in the session, before paring some of the move, with the red metal currently up by 1.1% at $458/lb.
• Copper futures remain in a bull cycle, with initial resistance at $488.50, the Feb 14 high, followed by round number resistance at $500.
• Finally, spot gold is broadly unchanged at $2,916/oz.
• A bull cycle in gold remains intact with sights on $2,962.2, a Fibonacci projection. The first key support to watch is $2,882.4, the 20-day EMA.

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
27/02/2025	0745/0845	**	FR	PPI
27/02/2025	0800/0900	**	SE	Economic Tendency Indicator
27/02/2025	0800/0900	***	ES	HICP (p)
27/02/2025	0800/0900	***	CH	GDP
27/02/2025	0900/1000	**	EU	M3
27/02/2025	0900/1000	**	IT	ISTAT Consumer Confidence
27/02/2025	0900/1000	**	IT	ISTAT Business Confidence
27/02/2025	1000/1000	**	GB	Gilt Outright Auction Result
27/02/2025	1000/1100	*	EU	Consumer Confidence, Industrial Sentiment
27/02/2025	1230/1330		EU	Publication of MonPol Meeting Account
27/02/2025	1330/0830	*	CA	Current account
27/02/2025	1330/0830	*	CA	Payroll employment
27/02/2025	1330/0830	***	US	Jobless Claims
27/02/2025	1330/0830	**	US	WASDE Weekly Import/Export
27/02/2025	1330/0830	**	US	Durable Goods New Orders
27/02/2025	1330/0830	***	US	GDP
27/02/2025	1415/0915		US	Kansas City Fed's Jeff Schmid
27/02/2025	1500/1000	**	US	NAR Pending Home Sales
27/02/2025	1500/1000		US	Fed Governor Michael Barr
27/02/2025	1530/1030	**	US	Natural Gas Stocks
27/02/2025	1600/1100	**	US	Kansas City Fed Manufacturing Index
27/02/2025	1630/1130	*	US	US Bill 08 Week Treasury Auction Result
27/02/2025	1630/1130	**	US	US Bill 04 Week Treasury Auction Result
27/02/2025	1645/1145		US	Fed Governor Michelle Bowman
27/02/2025	1815/1315		US	Cleveland Fed's Beth Hammack
27/02/2025	2015/1515		US	Philly Fed's Pat Harker
28/02/2025	2330/0830	**	JP	Tokyo CPI
28/02/2025	2350/0850	**	JP	Industrial Production
28/02/2025	2350/0850	*	JP	Retail Sales (p)