MNI ASIA MARKETS ANALYSIS: USMCA Tariff Deferrals

HIGHLIGHTS

• Short end Treasuries initially rallied after this morning's surprise jump in Challenger Job cut data, a 103% YoY increase largely tied to government layoffs. Rates pared gains after weekly jobless claims.
• Treasury futures see-sawed lower after Commerce Sec Lutnick floated that the USMCA tariff will "likely" be delayed to April 2", but rebounded after President Trump confirmed the deferral, stocks falling to mid-September lows.
• Focus squarely on Friday morning's February employment report release at 0830ET, while Fed Chair Powell will discuss his economic outlook (text, Q&A) at Chicago Booth's Monetary Policy Forum at 1230ET.

MNI US TSYS: Tsys Weaker/Off Lows, Challenger Job Cut Surge, USMCA Tariff Deferral

• Treasuries look to finish moderately lower for the most part, off lows, curves broadly steeper with short end rates outperforming (2s10s +4.720 at 31.684, off early high of 35.666).
• Busy session as rates see-sawed off early highs, heavy volumes (TYM5 near 3M after the bell) as rates rallied after Challenger job cut announcements surged in February to 172k, a 103% YoY increase largely tied to government layoffs.
• Rates pared gains after weekly jobless claims: Initial claims were lower than expected at 221k (sa, cons 233k) in the week to March 1, after an unrevised 242k.
• Treasury futures see-sawed lower after Commerce Sec Lutnick floated that the USMCA tariff will "likely" be delayed to April 2", but rebounded after President Trump confirmed the deferral, stocks falling to mid-September lows.
• Speaking at a WSJ event after the bell, Fed Gov Waller said wasn't thinking of a rate cut at the March 19 meeting - but "sees no problem with forecast of 2 rate cuts this year".
• Focus squarely on Friday morning's February employment report release at 0830ET, while Fed Chair Powell will discuss his economic outlook (text, Q&A) at Chicago Booth's Monetary Policy Forum at 1230ET.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES
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SOFR Benchmark Settlements:

• 1M +0.00761 to 4.32158 (-0.00313/wk)
• 3M +0.00895 to 4.29481 (-0.02197/wk)
• 6M +0.01462 to 4.19027 (-0.06648/wk)
• 12M +0.02136 to 3.99535 (-0.13137/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.34% (+0.01), volume: $2.525T
• Broad General Collateral Rate (BGCR): 4.33% (+0.01), volume: $962B
• Tri-Party General Collateral Rate (TCR): 4.33% (+0.01), volume: $936B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $112B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $284B

FED Reverse Repo Operation

RRP usage slips to $129.269B this afternoon from $139.493B Wednesday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 35 from 32 prior.

US SOFR/TREASURY OPTION SUMMARY

SOFR and Treasury options segued from better put volume early Thursday to heavy two-way call trade through midday as underlying futures reversed early gains, curves steeper with the short end outperforming. Projected rate cuts through mid-2025 gain slightly vs. morning levels (*) as follows: Mar'25 at -2.7bp (-2.2bp), May'25 at -14.3bp (-11.3bp), Jun'25 at -31.9bp (-27.4bp), Jul'25 at -42.2bp (-37.5bp).

SOFR Options:
+8,000 0QJ5/0QM5 96.50 call spds 9.0 ref 9643
+7,000 SFRH6 95.00/95.50 put spds 4 ref 96.42
+5,000 SFRJ5 95.68/95.75/95.81 put flys, 1.0 ref 95.985
+10,000 0QZ5 96.50/96.75/97.25/97.50 call condors 5.25 ref 96.395
+20,000 SFRM5 96.50/97.25 call spds, 3.0 ref 95.975
+20,000 0QU5 97.25/98.25 call spds, 8.25-8.5 ref 96.42
-20,000 SFRU5 96.50/97.50 call spds, 11.5-11.0 ref 96.215
-5,000 2QJ5 96.18/96.56 strangles, 17.5-17.0 ref 96.315
+2,000 2QJ5 96.31 straddles 32.0 ref 96.315
+7,500 SFRQ5 95.31/95.37/95.68 broken put tree, 0.25 ref 96.235
+4,000 SFRM6 96.00put, 25.5 vs. 96.47/0.32%
+3,000 SFRU5/SFRZ5 96.12 put spd covered, 2.5 net steepener (+Dec)
3,000 SFRH5 95.75/96.00 call spds
6,000 SFRJ5 96.12/96.62 call spds ref 95.95
5,000 2QH5 96.25/96.37 put spds ref 96.335

Treasury Options:
6,000 USJ5 114/115 put spds, 5 ref 117-06
1,400 TYM5 111/113.5/116 2x3x1 call flys ref 110-15.5
33,000 FVJ5 108 calls, 18.5
over +53,000 FVJ5 108/108.5 call spreads, 8.5 with futures trading from 107-19.5 to -18.75
Block/screen -15,000 TYJ5 109.25/110/110.5 broken put flys, 28 ref 110-20.5
over 23,000 TYJ5 113 calls, mostly at 5, 6 last
over 19,800 TYJ5 109.5 puts, 16 last
2,000 wk2 TY 110/110.5 put spds ref 110-18.5
3,300 TYJ5 109.5 puts vs. 111.5/112.5 call spd, 6 net/put over ref 110-16.5
2,000 TYM5 111/113.5/116 2x3x1 call flys ref 110-15.5
1,700 FVK5 104.25/104.5 put spds ref 107-17.5
1,300 TYJ5 109.5/111.5 strangles

MNI FOREX: USD Index Tests US Election Levels Below 104

• The USD index sits lower for a fourth consecutive session as we approach the APAC crossover, although daily ranges have been relatively contained on Thursday compared to the aggressive price action seen earlier in the week. Weak dollar sentiment tipped the DXY below 104.00, for the first time since the November 05 presidential election vote.
• Moderately hawkish tweaks to the ECB’s language and inflation forecasts prompted a brief bout of Euro strength, which saw EURUSD rise to a fresh recovery high of 1.0853, although the pair has slipped back to 1.08 in latest dealings. At its peak, the week’s rally totalled 4.5%, as technical and fundamental drivers continue to underpin the renewed optimism for the pair.
• Elsewhere, a surprisingly weak Challenger job cuts number helped front-end US yield extend their decline, which weighed substantially on USDJPY in early US trade. The pair fell to a session low of 147.32, the lowest level since early October last year. USDJPY had already been trading heavy as markets digest the latest Rengo pay tally data, which was an upside surprise in Japan. Price dynamics keep the trend needle firmly pointing south for USDJPY. Today’s resumption of the downtrend paves the way for an extension towards 146.95, a Fibonacci retracement. Below here, 145.92 is the level of note, the Oct 4 ’24 low.
• Late headlines from US Commerce Secretary Lutnick and then President Trump provided a more sanguine tariff narrative, as all goods tied to the USMCA were granted another month extension to April 02, as dialogue between US, Canada and Mexico officials continues. This boosted the likes of MXN and CAD, while underpinning a recovery in stocks. Although this remained brief and subsequently equities have headed lower, keeping risk sentiment in the spotlight as we approach tomorrow’s US employment report.
• SEK continues a streak of outperformance as a solid set of data outturns drives the currency higher still. Prelim inflation data covering February came in well ahead of expectations, further pinching Riksbank pricing across 2025. As a result, EUR/SEK has broken lower, consolidating comfortably through the 11.00 handle to print the lowest levels since late 2022.

MNI FX OPTIONS: Expiries for Mar06 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0500(1.8bln), $1.0550(973mln), $1.0580-00(1.5bln), $1.0625-30(855mln), $1.0700-10(844mln), $1.0845-50(2.3bln)
• USD/JPY: Y148.00($786mln), Y149.00($511mln), Y149.70-85($620mln)
• USD/CAD: C$1.4400($802mln)
• USD/CNY: Cny7.2000($1.3bln), Cny7.2800($1.4bln)

MNI US STOCKS: Late Equities Roundup: Back To Mid-Sep Lows Despite Tariff Deferral

• US Stocks remain broadly weaker, near late session lows Thursday amid ongoing trade war concerns and disappointing earnings Thursday. Currently, the DJIA trades down 581.39 points (-1.35%) at 42424.02, S&P E-Minis down 126 points (-2.15%) at 5725.75, Nasdaq down 555.6 points (-3%) at 17997.04.
• Buy the rumor, sell the news? Stocks had bounced off morning lows after Commerce Secretary Lutnick would "likely defer" tariffs on USMCA compliant products - but resumed decline after President Trump confirmed that all Mexican goods subject to duty-free trade under the US-Mexico-Canada Trade Agreement (USMCA) will be exempted from tariffs until April 2, when Trump's reciprocal tariffs go into effect.
• Information Technology and Consumer Discretionary sectors underperformed in late trade, semiconductor stocks weighing on the tech sector late: Palantir Technologies -9.05%, Oracle Corp-6.53%, Super Micro Computer -6.09%, Broadcom -5.94% and Monolithic Power Systems -5.86%.
• Tesla -6.09%, Starbucks Corp -5.73% and Airbnb -4.94% weighed on the Discretionary sector as did cruise lines: Carnival Corp-5.91%, Royal Caribbean Cruises -5.62% and Norwegian Cruise Line -5.31%.
• Energy and Consumer Staples sectors outperformed in late trade, oil and gas shares buoyed the Energy sector Valero Energy +1.67%, Exxon Mobil +1.54%, Chevron +1.00% and Hess +0.97%. Meanwhile, Archer-Daniels-Midland +3.56%, Bunge Global +3.29%, Dollar General +2.99% and Constellation Brands +2.14% helped buoy the Consumer Staples sector.

MNI EQUITY TECHS: E-MINI S&P: (H5) Bear Leg Extends

• RES 4: 6178.75 High Dec 6 ‘24 and key resistance  
• RES 3: 6166.50 High Jan 19
• RES 2: 6013.11 50-day EMA
• RES 1: 5884.00/5924.0 High Mar 4 / Low Feb 25                
• PRICE: 5742.00 @ 1508 ET Mar 6 
• SUP 1: 5728.25 Intraday low              
• SUP 2: 5698.25 50.0% retracement of the Aug 5 - Dec 6 ‘24 bull leg
• SUP 3: 5658.00 Low Sep 12 ‘24
• SUP 4: 5584.85 61.8% retracement of the Aug 5 - Dec 6 ‘24 bull leg    

A bear threat in S&P E-Minis remains present and a sharp sell-off this week reinforces a short-term downtrend. The contract has traded to a fresh short-term cycle low again, today, marking an extension of the current bear leg. This reinforces a stronger reversal and a double top pattern on the daily scale. The focus is on 5698.25, a Fibonacci retracement. Initial firm resistance to watch is 6013.11, the 50-day EMA.

MNI COMMODITIES: Crude Steady Amid Tariff Noise, Gold Outlook Remains Bullish

• Crude oil prices have unwound earlier modest gains and are broadly unchanged on the day following an apparent softening in stance on US tariffs on Canada and Mexico. OPEC+ plans to return output from April and demand concerns amidst increased trade protectionism continue to weigh on prices.
• WTI Apr 25 is up by 0.1% at $66.4/bbl.
• Late headlines from US Commerce Secretary Lutnick and then President Trump suggested a more constructive tariff narrative, as all goods tied to the USMCA were granted another month extension to April 02.
• The current bearish trend condition in WTI futures remains intact and this week’s fresh short-term cycle lows reinforce current conditions. Initial support is seen at $65.22, the Mar 5 low, followed by $63.61, the Oct 10 ‘24 low.
• Henry Hub prices have retreated on Thursday following recent multi-year high levels fuelled on gas tariff fears. Record high output and a smaller than expected draw in the EIA report pulled the momentum out of prices.
• US Natgas Apr 25 is down by 3.4% at $4.30/mmbtu.
• Meanwhile, spot gold has pared earlier losses, but remains 0.2% lower on the session at $2,914/oz.
• The trend condition in gold is still bullish and the recent pullback appears to have been a correction. A stronger rally would refocus attention on the next objective at $2,962.2, a Fibonacci projection. 

FRIDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
07/03/2025	0700/0800	**	DE	Manufacturing Orders
07/03/2025	0745/0845	*	FR	Foreign Trade
07/03/2025	0800/0900	**	ES	Industrial Production
07/03/2025	0930/1030		EU	Lagarde Address at ECB International Women's Day 2025 conf
07/03/2025	0940/1040		EU	ECB International Women's Day conf. incl. Lagarde, Nagel, Panetta
07/03/2025	1000/1100	***	EU	GDP (final)
07/03/2025	1000/1100	*	EU	Employment
07/03/2025	-	***	CN	Trade
07/03/2025	1330/0830	***	CA	Labour Force Survey
07/03/2025	1330/0830	***	US	Employment Report
07/03/2025	1515/1015		US	Fed Governor Michelle Bowman
07/03/2025	1545/1045		US	New York Fed's John Williams
07/03/2025	1720/1220		US	Fed Governor Adriana Kugler
07/03/2025	1730/1230		US	Fed Chair Jerome Powell
07/03/2025	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly
07/03/2025	1800/1300		US	Fed Governor Adriana Kugler
07/03/2025	2000/1500	*	US	Consumer Credit