MNI ASIA OPEN: Cautious Risk On, Mkt Awaits Tariff Certainty

EXECUTIVE SUMMARY

• MNI US TARIFFS: 3-Tier Plan Returns, Without A "No Tariff" Band
• MNI US: Musk To Step Back From Prominent Government Advisory Role - Politico
• MNI US: Senator McConnell To Vote Yes On Democratic Tariff Resolution - NBC
• MNI MEXICO: Sheinbaum: No Tit-For-Tat Tariffs On The US
• MNI US DATA: Strength In Factory Orders Reinforces Solid Pre-Tariff Narrative
• MNI US DATA: ADP Beats In Solid Report, Usual NFP Correlation Caveats Aside

US

MNI US: Extension Of Recent Risk-On With Sky News Reporting On Banded Tariffs

Sky News reporting a potential banding of upcoming tariffs by country and industry has helped extend the intraday risk-on seen ahead of planned announcements from 1600ET. 

• "Trump tariffs to be banded by country and industry - White House source
• A source close to the White House has told our economics and data editor Ed Conway there will three separate bands of tariffs - 10%, 15%, and 20%.
• The bands will differ both by country and by industry."

It compares to some recent media reports such as the Washington Post yesterday reporting that “White House aides have drafted a proposal to impose tariffs of about 20 percent on most imports to the United States, three people familiar with the matter said, as President Donald Trump pushes for the most aggressive overhaul of the global economic system in decades.”

NEWS

MNI US TARIFFS: 3-Tier Plan Returns, Without A "No Tariff" Band

The 3-tiered US tariff plan that may be be announced today - as reported by Sky News, citing a White House source - has been mentioned before. The Wall Street Journal on March 18 suggested that this idea had been discussed among senior officials, but it seemed to have been abandoned, with a country-by-country approach preferred.

• Notably, the WSJ piece also reported that no matter what was decided, it was expected that VAT would be taken into account as a tariff to be reciprocated by the US - and also, there was attention paid to the fact there wasn't a tier for "zero" tariffs, consistent with theh Sky story (which pointed to 10/15/20% bands). Recall that the WSJ story at the time triggered a strong risk-off reaction.
• If it turns out that the administration adopts the 3-tier plan, it may simply be the case that they ran out of time to come up with a more targeted plan ahead of the deadline. This was the WSJ on March 18:
  • "The simplified three-tier tariff proposal -- with low, medium and high rates -- was discussed on Thursday [March 13] at a meeting featuring the likes of chief of staff Susie Wiles, Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, deputy chief of staff for policy Stephen Miller, Office of Management and Budget Director Russ Vought, and Senior Counselor for Trade and Manufacturing Peter Navarro."

MNI US: Musk To Step Back From Prominent Government Advisory Role - Politico

Politico reports that non-governmental advisor Elon Musk is expected to step back from his public-facing duties in President Donald Trump's White House, despite Trump remaining "pleased" with Musk and his Department of Government Efficiency initiative. Politico notes: "The transition, the insiders said, is likely to correspond to the end of Musk’s time as a “special government employee,” a special status that temporarily exempts him from some ethics and conflict-of-interest rules. That 130-day period is expected to expire in late May or early June." Should Musk's departure come ahead of the 130-day period it could be seen as the Trump administration managing political exposure to Musk's sliding approval rating. 

MNI US: Senator McConnell To Vote Yes On Democratic Tariff Resolution - NBC

Senator Tim Kaine (D-VT) said that former Senate Republican Leader Mitch McConnell (R-KY) indicated that he will vote yes on a Democratic resolution that would "undo" President Donald Trump's tariffs on Canada by challenging the national security justification for their imposition, according to NBC News' Frank Thorpe on X. The resolution is seen as a message exercise as House Speaker Mike Johnson (R-LA) would kill the bill in the House, should it pass the Senate. 

MNI: EU Liberation Day Retaliation May Take Time - EU Source

EU retaliation against the reciprocal tariffs to be announced by US President Trump in his 'Liberation Day" announcement later today may take about a month and a half to implement at the earliest. "It will take some time. First, the (European) Commission has to analyse the measures and impact, which will take a week at least, then consultations and the implementing act," a source close to EU trade policymakers said. 

MNI MEXICO: Sheinbaum: No Tit-For-Tat Tariffs On The US

Speaking in her morning press conference, President Claudia Sheinbaum says that Mexico "will not impose tit-for-tat tariffs" on the United States once Donald Trump unveils his 'reciprocal' tariffs later today. Sheinbaum's stance is not a surprise, with her administration also refusing to impose retaliatory tariffs after the US initially imposed levies on steel and aluminium imports. Claims that "We have a plan to strengthen the economy under any circumstances. It's Plan Mexico"

MNI US TSYS: Tsy Yields Higher Ahead Tariff Annc, ADP Gains Ahead NFP

• Treasury futures are trading weaker but off lows after the bell, main focus on this afternoon's reciprocal tariff announcement from the White House, scheduled for 1600ET. Much speculation through the day from ending tariffs on cheap (under $800) China imports to a 3-tier plan first mentioned by the WSJ on March 18.
• Treasuries rallied after this morning's higher than expected ADP private jobs gain but retreated in steps off midmorning highs as stocks staged a modest rally off lows. ADP employment growth was stronger than expected in March at 155k (cons 120k) after a marginally upward revised 84k (initial 77k) in February.
• Treasurys extended session lows after Politico headlines announce that Elon Musk will step back from "governing partner" role in the next few weeks. Several new outlets have announced over the last couple days that Musk would be stepping down from DOGE by the end of May.
• Treasuries Jun'25 10Y contract currently trades 111-17 (-8) vs. 111-09 low, technical support below at 110-26.5 (20-day EMA), compares to morning high of 112-02.5 with technical resistance above at 112-13 (1.500 proj of the Jan 13 - Feb 7 - Feb 12 price swing). Curves are mildly flatter, off early week highs: 2s10s -.127 at 28.245, 5s30s -1.002 at 58.799.
• Cross asset update: stocks bounce (SPX eminis +18.5 at 5693.00), Bbg US$ index -2.59 at 1270.69, Gold higher at 1325.93, crude firmer (WTI +.61 at 71.81).

OVERNIGHT DATA

MNI US DATA: ADP Beats In Solid Report, Usual NFP Correlation Caveats Aside

• ADP employment growth was stronger than expected in March at 155k (cons 120k) after a marginally upward revised 84k (initial 77k) in February.
• It leaves an average monthly 142k increase in Q1 and with the latest increase above the average 144k in 2024, offering a reasonably solid report along with other hard data vs weaker soft data.
• Correlation with private payrolls growth remains a concern. In latest vintages for both releases, ADP undershot by -56k in Feb, overshot by 105k in Jan and undershot by -111k in Dec. That said, the private payrolls series has admittedly been the more volatile series in recent months.
• Bloomberg consensus for private payrolls currently stands at 135k.
• With that standard caveat aside, there was an impressive bounce in seasonally adjusted hiring from smallest firms, with those with 1-19 employees adding 42k jobs after a rare 4k decline in Feb (revised from the -17k initially, a first monthly decline since Dec 2023).
• There’s no clear trend by firm size when comparing the Q1 average job growth to that of 2024. The smallest (1-19) and largest (500+) employees have both seen a moderation in hiring (average 22k vs 39k and 54k vs 67k respectively) but all other sized firms have seen an acceleration in hiring.
• On the pay front, median annual pay eased to a new recent low for job changers at 6.5% Y/Y (from 6.8% in Feb and through September’s 6.6% for the lowest since early 2021.
• Job stayers meanwhile eased a tenth to a joint recent low of 4.6% Y/Y (otherwise lowest since mid-2021) with the combination seeing a joint low for the pay premium at 1.9pps. 

MNI US DATA: Strength In Factory Orders Reinforces Solid Pre-Tariff Narrative

New orders for manufactured goods ("factory orders") were a little stronger than expected in February, with the headline reading of 0.6% M/M (0.5% expected, 1.8% prior upwardly revised from 1.7%). The 3M/3M annualized rate of orders growth picked up to 1.6%, implying improved momentum after 2 consecutive negative monthly readings.

• Durable goods were minimally revised in the final reading: headline orders were upped 0.1pp to 1.0% M/M, but orders ex-transport (0.7%), and core capital goods orders (-0.2%) and shipments (0.8%) were all unrevised.
• As we noted following the durable goods report - in which orders greatly exceeded expectations - manufacturing data for February was suggestive of strong "hard" data for manufacturing in Q1. The factory orders data further supports this narrative.
• Incoming data since then - including a very weak ISM Manufacturing report for March - further supports the other part of the narrative however, which is that recent manufacturing strength reflects front-running the impact of tariffs, implying a dropoff in demand later in the year that may already be reflected by slowing core capital goods orders in February.

MNI US DATA: Mortgage Applications Continue To Track Sideways With Rates

MBA composite mortgage applications continued to see another mild pullback as 30Y rates further stabilized around the 6.7% level. It masks new purchase applications at one of their highest levels in the past two years but activity is still subdued on a historical basis. 

• Composite applications dipped -1.6% (sa) last week after -2.0% the week prior and -6.2% before that, further chipping away at a 34% two-week increase in late Feb/early March.
• Once again, refis led the modest pullback (-5.6% after -5.3%) whilst new purchase applications saw their fifth consecutive weekly increase (most recently 1.5% after 0.7%).
• The 30Y conforming rate inched another 1bp lower to 6.70%, broadly consolidating around the 6.7% level for the past five weeks now having eased from a recent high of 7.09% in early January.
• It's a move that stoked a relatively modest uplift in activity when looking at broader trends, although activity is still subdued with new purchases at 61% of 2019 levels and refis at 41%. 

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 208.66 points (0.5%) at 42194.14
S&P E-Mini Future up 35 points (0.62%) at 5708.75
Nasdaq up 143.4 points (0.8%) at 17591.96
US 10-Yr yield is up 2.5 bps at 4.1936%
US Jun 10-Yr futures are down 9.5/32 at 111-15.5
EURUSD up 0.0059 (0.55%) at 1.0852
USDJPY up 0.46 (0.31%) at 150.07
WTI Crude Oil (front-month) up $0.55 (0.77%) at $71.75
Gold is up $12.96 (0.42%) at $3126.56

European bourses closing levels:
EuroStoxx 50 down 16.35 points (-0.31%) at 5303.95
FTSE 100 down 26.32 points (-0.3%) at 8608.48
German DAX down 149.14 points (-0.66%) at 22390.84
French CAC 40 down 17.53 points (-0.22%) at 7858.83

US TREASURY FUTURES CLOSE

3M10Y +2.002, -11.822 (L: -19.864 / H: -8.761)
2Y10Y -0.614, 27.758(L: 25.986 / H: 29.598)
2Y30Y -1.279, 62.606 (L: 61.355 / H: 65.804)
5Y30Y -1.412, 58.389 (L: 58.197 / H: 61.823)
Current futures levels:
Jun 2-Yr futures down 3.375/32 at 103-18.25 (L: 103-17.25 / H: 103-22.875)
Jun 5-Yr futures down 7.75/32 at 108-7.25 (L: 108-04 / H: 108-20.5)
Jun 10-Yr futures down 9.5/32 at 111-15.5 (L: 111-09 / H: 112-02.5)
Jun 30-Yr futures down 17/32 at 118-2 (L: 117-19 / H: 119-09)
Jun Ultra futures down 18/32 at 123-21 (L: 122-28 / H: 125-07)

MNI US 10YR FUTURE TECHS: (M5) Tests Key Resistance

• RES 4: 112-23+ 1.618 proj of the Jan 13 - Feb 7 - Feb 12 price swing
• RES 3: 112-15   61.8% of the Sep 11 ‘24 - Jan 13 bear cycle (cont) 
• RES 2: 112-13   1.500 proj of the Jan 13 - Feb 7 - Feb 12 price swing  
• RES 1: 112-02+ Intraday high   
• PRICE:‌‌ 111-11 @ 1315 ET Apr 2
• SUP 1: 110-26+ 20-day EMA
• SUP 2: 110-11/06 50-day EMA / Low Mar 27
• SUP 3: 110-00   High Feb 7 and a key support
• SUP 4: 109-21+ Trendline support drawn from the Jan 13 low      

Treasury futures are holding on to their latest gains following the recovery from last week’s low of 110-06+ (Mar 27). The outlook remains bullish and attention is on key resistance at 112-01, the Mar 4 high. It has been pierced, a clear break would confirm a resumption of the uptrend and maintain a price sequence of higher highs and higher lows. This would open 112-13, a Fibonacci projection. Initial support to watch is 110-26+, the 20-day EMA.

SOFR FUTURES CLOSE

Jun 25 -0.060 at 95.880
Sep 25 -0.075 at 96.160
Dec 25 -0.070 at 96.360
Mar 26 -0.060 at 96.490
Red Pack (Jun 26-Mar 27) -0.055 to -0.04
Green Pack (Jun 27-Mar 28) -0.055 to -0.045
Blue Pack (Jun 28-Mar 29) -0.06 to -0.055
Gold Pack (Jun 29-Mar 30) -0.055 to -0.05

SOFR FIXES AND PRIOR SESSION REFERENCE RATES
​​​​​​​
SOFR Benchmark Settlements:

• 1M +0.00034 to 4.31930 (-0.00435/wk)
• 3M -0.00364 to 4.27734 (-0.02027/wk)
• 6M -0.00244 to 4.16448 (-0.05113/wk)
• 12M -0.00869 to 3.95120 (-0.10166/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.39% (-0.02), volume: $2.589T
• Broad General Collateral Rate (BGCR): 4.35% (-0.01), volume: $972B
• Tri-Party General Collateral Rate (TCR): 4.35% (-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: $264B

FED Reverse Repo Operation

RRP usage inches up to $233.488B this afternoon from $230.063B on Tuesday. Usage had surged to the highest level since December 31, 2024 this past Monday: $399.167B. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 41.

MNI PIPELINE: Corporate Bond Update: $3.4B Holcim Finance 4pt Launched

• Date $MM Issuer (Priced *, Launch #)
• 04/02 $3.4B #Holcim Finance $700M 2Y +70, $700M 3Y +80, $1B 5Y +100, $1B 10Y +120
• 04/02 $1B Patterson Cos 7NC3 investor calls

MNI BONDS: EGBs-GILTS CASH CLOSE: Bunds Underperform Ahead Of US Tariff Announcement

Bunds underperformed in the European government FI space Wednesday in anticipation of the US tariff announcement after the cash close.

• Global core FI started the session on a positive note, with a risk-off tone with US tariff policy in focus.
• But Bunds and Gilts reversed sharply lower in afternoon trade following a Bloomberg sources piece saying the European Commission is mulling emergency measures to cushion the EU economy from the impact of US tariffs.
• On the day, the UK curve twist steepened, with Germany's bear steepening.
• Periphery/semi-core EGB spreads narrowed slightly, aided by the aforementioned headlines on EU measures.
• The US tariff announcement comes at 2100BST, with any European response closely eyed in the aftermath.
• Thursday's schedule includes Spanish and Italian March Services PMI (and finals elsewhere) and Eurozone PPI, along with appearances by ECB's Guindos and Schnabel and the accounts of the March ECB meeting.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.6bps at 2.038%, 5-Yr is up 2.4bps at 2.328%, 10-Yr is up 3.4bps at 2.721%, and 30-Yr is up 4.2bps at 3.072%.
• UK: The 2-Yr yield is down 0.5bps at 4.169%, 5-Yr is up 0.3bps at 4.257%, 10-Yr is up 0.6bps at 4.64%, and 30-Yr is up 0.3bps at 5.25%.
• Italian BTP spread down 0.7bps at 109.5bps / Spanish down 0.4bps at 62.4bps

MNI FOREX: EURJPY Sharply Higher as Tariff Announcements Awaited

• A combination of EUR strength and USD weakness continues to play out across the US trading session, as the clocks ticks down headed into Trump's Rose Garden appearance at 1600ET/2100BST. The original EUR buying phase followed the Bloomberg report that the EU are planning emergency measures to guard the economy against Trump's tariffs, possibly bolstered by the rally through 1.0850 resistance and the weekly high.
• That report, twinned with headlines that Canada and Mexico are working to enhance their trade deal goes to show that tariffed countries are seemingly looking to take sharp action to both combat Trump's tariffs, as well as enhance cooperation to dampen the blow to economic growth that could follow the immediate installation of reciprocal tariffs today.
• Risk in general has also been significantly supported in anticipation of the tariff event, spurred on by reports suggesting that President Donald Trump has told his inner circle that Elon Musk will be stepping back in the coming weeks. Major US benchmarks latched on to the potential for a less strict regime at DOGE, and rallied over 2% from the lows in sympathy.
• This dynamic also weighed heavily on the Japanese yen, prompting USDJPY to rally back above 150.00 and EURJPY extend session gains to around 1%.
• For EURJPY, the trend structure in remains bullish and recent weakness appears corrective. The pullback has allowed an overbought condition to unwind. On the topside, attention is on 164.08, the Jan 24 high. A clear break of this hurdle would strengthen a bullish condition and open 164.90, the Dec 30 ‘24 high.
• Despite the softer USD and the renewed optimism for equities, the Mexican peso has underperformed since the US cash open, now 0.40% lower against the greenback. Standing out is the move for EURMXN, where the 1.4% advance (at peak) saw us breach the March highs, placing the cross at the highest level since November 06.

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
03/04/2025	0630/0830	***	CH	CPI
03/04/2025	0700/0300	*	TR	Turkey CPI
03/04/2025	0715/0915	**	ES	S&P Global Services PMI (f)
03/04/2025	0715/0915	**	ES	S&P Global Composite PMI (final)
03/04/2025	0720/0920		EU	ECB's De Guindos On "Financial Stability In Uncertain Times"
03/04/2025	0745/0945	**	IT	S&P Global Services PMI (f)
03/04/2025	0745/0945	**	IT	S&P Global Composite PMI (final)
03/04/2025	0750/0950	**	FR	S&P Global Services PMI (f)
03/04/2025	0750/0950	**	FR	S&P Global Composite PMI (final)
03/04/2025	0755/0955	**	DE	S&P Global Services PMI (f)
03/04/2025	0755/0955	**	DE	S&P Global Composite PMI (final)
03/04/2025	0800/1000	**	EU	S&P Global Services PMI (f)
03/04/2025	0800/1000	**	EU	S&P Global Composite PMI (final)
03/04/2025	0830/0930		GB	Decision Maker Panel data
03/04/2025	0830/0930	**	GB	S&P Global Services PMI (Final)
03/04/2025	0830/0930	***	GB	S&P Global/ CIPS UK Final Composite PMI
03/04/2025	0900/1100	**	EU	PPI
03/04/2025	0900/1000	**	GB	Gilt Outright Auction Result
03/04/2025	1000/1200		EU	ECB's Schnabel At OECD Seminar
03/04/2025	1230/0830	***	US	Jobless Claims
03/04/2025	1230/0830	**	US	WASDE Weekly Import/Export
03/04/2025	1230/0830	**	CA	International Merchandise Trade (Trade Balance)
03/04/2025	1230/0830	**	CA	International Merchandise Trade (Trade Balance)
03/04/2025	1230/0830	**	US	Trade Balance
03/04/2025	1345/0945	***	US	S&P Global Services Index (final)
03/04/2025	1345/0945	***	US	S&P Global US Final Composite PMI
03/04/2025	1400/1000	***	US	ISM Non-Manufacturing Index
03/04/2025	1430/1030	**	US	Natural Gas Stocks
03/04/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
03/04/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
03/04/2025	1630/1230		US	Fed Vice Chair Philip Jefferson
03/04/2025	1830/1430		US	Fed Governor Lisa Cook
04/04/2025	2330/0830	**	JP	Household spending