MNI ASIA OPEN: Concept of a Plan, China Negotiation Slog

EXECUTIVE SUMMARY

• MNI BRIEF: Kashkari Says Independent Fed ‘Foundational’ 
• MNI CROSS ASSET: Risk-On Trimmed With Bessent On China “Slog” and Politico On Deals
• MNI US DATA: Cleveland Fed On Extent Of Passing On Of Tariff Cost Anticipation
• MNI US DATA: Johnson Redbook Points To Solid April For Retailers, With Some Caveats

US

MNI BRIEF: Kashkari Says Independent Fed ‘Foundational’ 

Central bank independence is key to ensuring the Federal Reserve can keep inflation low and stable in the long run, Minneapolis Fed President Neel Kashkari said Tuesday. “It's now conventional wisdom and advanced economies all around the world that keeping monetary policy independent of short term political considerations leads to better outcomes for that economy, leads to lower inflation over time, leads to stronger economic growth, leads to better levels, higher levels of employment,” Kashkari said. 

NEWS

MNI CROSS ASSET: Risk-On Trimmed With Bessent On China “Slog” and Politico On Deals

Two trade-related headlines have helped more than reverse an earlier shift higher in sentiment. ESM5 is still 1.8% higher on the day but now sits ~15 points lower than pre-initial Bessent headlines at 5278 via a session high of 5339.25. 

• "BESSENT SAYS CHINA NEGOTIATIONS WILL BE A 'SLOG', DESCRIBES CURRENT BILATERAL TRADE SITUATION AS AN EMBARGO -PERSON WHO HEARD JP MORGAN SESSION" – RTRS
• It’s a more downbeat version of Bloomberg earlier reporting that US Tsy Sec Bessent told a closed-door investor summit Tuesday that the tariff standoff with China is unsustainable and that he expects the situation to de-escalate. Negotiations haven’t started but that a deal is possible, according to people who attended his session at an event hosted by JPMorgan Chase & Co. in Washington, which wasn’t open to the public or media.
• Politico also ran a story saying the White House is “close” on Japan and India trade agreements but with details sounding far less favorable. One segment from it, here: “I wouldn’t even call them deals,” another person close to the White House said of the frameworks the administration is looking to announce. “Basically, [it’s] an agreement that we would like to talk about doing a deal.”

MNI US: Treasury Dept Expected To Send Congress X-Date Projection Next Week

The US Treasury Department is expected to send Congress, next week, its projection for the so-called X-date, when the federal government exhausts its borrowing ability. Punchbowl News reports: “Most estimates for the date when the federal government will reach its borrowing limit… peg it at some point this summer or early fall. But Treasury is expected to give its most updated estimate next week as April tax receipts come in.”

MNI FRANCE: BBG-Macron Floats Snap Election As Early As Autumn

MNI BOE: A number of speakers this week: Pill and Bailey headline tomorrow

It's potentially a big week for the BOE. Today we heard from external member Megan Greene who has long been on the more hawkish side of the spectrum but today in her comments on Bloomberg TV didn't use the word "cautious" or "gradual" as she had done in her previous remarks.

MNI US TSYS: Reality Check Slowly Emerging For Tariff Negotiations

• Treasuries look to finish mixed Tuesday, curves unwinding a large portion of Monday's steepening with bonds outperforming weaker short end rates (2s10s -6.174 at 58.027) as markets re-assess tariff-tied risks to global trader and the Trump Admin's efforts to meddle with the Federal Reserve's independent policy making.
• Europe returned from extended Easter holiday improved market depth more than trade volumes evidently (TYM5 at 1.2M near steady to Monday's levels) while the week openers risk-off tone was gradually unwound.
• Brief midday risk-on move extended after headlines that Tsy Sec Bessent (speaking at a JP Morgan event in DC - closed to public and media) sees the China tariff standoff as unsustainable and expects a de-escalation to occur. Bloom quickly came off the rose as sources clarified the gist of negotiations would be a "slog".
• Limited react to data: The Philly Fed non-mfg activity index fell further in April to -42.7 from -32.5 in Mar, -13.1 in Feb and -9.1 in Jan; Johnson Redbook Same-Store Retail month-to-date Y/Y sales up 7.0% (the week ending April 19 was +7.4% Y/Y). Same with Fed speakers, taking a back seat to headline risk.
• Cross asset: Gold retreats to 5372.0 currently after topping 5500.0 briefly overnight; Greenback rebounding BBG US$ index +5.01 at 1221.15; SPX eminis +110 at 5294.75.

OVERNIGHT DATA

MNI US DATA: Philly Service Providers Unable To Pass Large Cost Increases On

The Philly Fed non-manufacturing index was weak across the board although that included more pronounced signs of limited pricing power. Responses were collected from Apr 7-17 which should give a good assessment of latest US trade policy gyrations. 

• The Philly Fed non-mfg activity index, which specifically asks respondents their assessment of business activity for the region rather than their own firm, fell further in April to -42.7 from -32.5 in Mar, -13.1 in Feb and -9.1 in Jan.
• It was last lower in Apr and May 2020 and otherwise would be a low for a series that started in 2011.
• The firm-specific activity index meanwhile sounds less pessimistic at -26.7 after -17.5, but it tells the same relative story at it third lowest on in the series history.
• There’s a similar story in six-month ahead expectations as well, with both regional and firm-level activity at levels only seen more pessimistic in the depths of the pandemic.
• Back to current conditions, company new orders saw some relative improvement as they increased from -19.5 (lowest since Apr 2023) to -6.9 although full-time employment saw a second consecutive decline (-7.2 in Apr after -7.5 in Mar for largest declines since Aug 2024).
• Importantly though for a Fed that is increasingly saying it will focus on inflation in event of a dual mandate trade-off, prices paid increased further to 46.5 (highest since Feb 2023) but there is clear difficultly at passing these higher costs on with prices received at -0.1 after 8.4 in March. 

MNI US DATA: Cleveland Fed On Extent Of Passing On Of Tariff Cost Anticipation

The Cleveland Fed doesn’t produce a business activity index like some regional Feds do but it has published some tariff-focused questions it asked respondents in its District through Feb 6-13 (see in full here). Whilst this predates the significant escalation in tariff announcements since Apr 2, almost half of those affected were already passing anticipated cost increases on. There were however suggestions of it continuing to become harder to pass these cost increases on. 

• 64% of respondents saw tariffs impacting their business, with 24% unsure and 12% seeing no impact.
• The highest shares expecting an impact were retail (82%), mfg (75%), construction (70%) whilst professional and business services were the least likely to be impacted (21% yes vs 36% no).
• Of those expecting an impact, 85% expected an increase in input costs vs 75% expecting an increase in selling prices.
• That question doesn’t offer magnitudes but there are hints elsewhere at the continued reduction in pricing power noted in multiple editions of the Fed’s Beige Book (to be updated tomorrow) and most recently today’s Philly Fed non-manufacturing survey. Specifically, whilst 38% see no change in their ability to pass on price increases compared to one year ago, 36% find it “somewhat harder” and 12% “significantly harder” vs 13% somewhat and 1% much easier.
• This tallies with 60% of respondents expecting demand to decrease (31% saw no change, 9% an increase) and 22% expecting employment to decline (75% no change, 3% increase).
• That said, 46% of respondents were already passing anticipated cost increases through to customers (in answer to "What actions, if any, are you taking in anticipation of tariffs on imports?”). Also of note considering the Trump administration's plan to boost domestic production, 29% suggested they were finding new domestic suppliers but just 4% anticipated bringing outsourced production or processes in house. 

MNI US DATA: Johnson Redbook Points To Solid April For Retailers, With Some Caveats

April is shaping up as solid for retail sales, with Johnson Redbook Same-Store Retail month-to-date Y/Y sales up 7.0% (the week ending April 19 was +7.4% Y/Y).

• This brings month-to-date retail sales in the series (which captures around 80% of Census Bureau retail sales) above retailers' targeted 6.4% gain.
• If the current rate is sustained for the full month, April Johnson Redbook retail sales would be the strongest Y/Y since December 2022.
• The latest gain is party a calendar effect, however, which may be partially paid back next week as "a later Easter [compared to 2024] contributed to higher sales volume during the week", and "retailers anticipate declining sales volume next week, as most businesses closed for Easter Sunday".
• But anecdotes were generally positive: "the warm weather had a positive impact on the seasonal apparel market... food and consumables also performed well. Additionally, home improvement and outdoor merchandise showed signs of increased demand as the season changes.
• There was also some indication of tariff front-running continuing in the week: "shoppers took the opportunity to stock up on essential items and larger purchases to avoid upcoming tariff hikes."

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 898.91 points (2.36%) at 39067.66
S&P E-Mini Future up 109.75 points (2.12%) at 5294.75
Nasdaq up 331.6 points (2.1%) at 16201.89
US 10-Yr yield is down 1.8 bps at 4.393%
US Jun 10-Yr futures are down 2.5/32 at 110-23.5
EURUSD down 0.0084 (-0.73%) at 1.1431
USDJPY up 0.61 (0.43%) at 141.47
WTI Crude Oil (front-month) up $1.23 (1.95%) at $64.31
Gold is down $49.8 (-1.45%) at $3374.61

European bourses closing levels:
EuroStoxx 50 up 26.11 points (0.53%) at 4961.45
FTSE 100 up 52.94 points (0.64%) at 8328.6
German DAX up 87.67 points (0.41%) at 21293.53
French CAC 40 up 40.61 points (0.56%) at 7326.47

US TREASURY FUTURES CLOSE

3M10Y -0.78, 7.288 (L: 2.496 / H: 9.778)
2Y10Y -6.174, 58.027 (L: 55.862 / H: 65.106)
2Y30Y -6.576, 106.791 (L: 103.603 / H: 114.627)
5Y30Y -2.867, 89.693 (L: 87.243 / H: 93.84)
Current futures levels:
Jun 2-Yr futures down 4.125/32 at 103-24.25 (L: 103-23.875 / H: 103-27.875)
Jun 5-Yr futures down 4/32 at 108-7.5 (L: 108-03.25 / H: 108-12)
Jun 10-Yr futures down 2.5/32 at 110-23.5 (L: 110-16.5 / H: 110-30)
Jun 30-Yr futures up 16/32 at 113-17 (L: 112-23 / H: 113-29)
Jun Ultra futures up 18/32 at 117-9 (L: 116-10 / H: 117-29)

MNI US 10YR FUTURE TECHS: (M5) Recent Gains Are Considered Corrective

• RES 4: 113-04   76.4% retracement of the Apr 7 - 11 bear leg
• RES 3: 112-12   61.8% retracement of the Apr 7 - 11 bear leg
• RES 2: 111-25   50.0% retracement of the Apr 7 - 11 bear leg
• RES 1: 111-01+/17+ 20-day EMA / High Apr 16
• PRICE:‌‌ 110-21 @ 11:09 BST Apr 22
• SUP 1: 110-15/109-08   Low Apr 15 / 11 and the bear trigger
• SUP 2: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
• SUP 3: 108-21   Low Feb 19
• SUP 4: 108-03+ Low Dec 12 ‘24 and a key support 

Treasury futures have pulled back from last week’s highs. For now, recent gains are considered corrective and the bear cycle that started Apr 7, remains in play. The next resistance to watch is 111-25, 50.0% of the Apr 7 - 11 bear-leg sell-off. For bears, a resumption of weakness would refocus attention on 109-08, the Apr 11 low and the bear trigger. Clearance of this level would resume the downtrend.

SOFR FUTURES CLOSE

Jun 25 -0.040 at 95.90
Sep 25 -0.075 at 96.260
Dec 25 -0.090 at 96.530
Mar 26 -0.095 at 96.705
Red Pack (Jun 26-Mar 27) -0.095 to -0.055
Green Pack (Jun 27-Mar 28) -0.045 to -0.015
Blue Pack (Jun 28-Mar 29) -0.01 to steady
Gold Pack (Jun 29-Mar 30) +0.005 to +0.015

REFERENCE RATES (PRIOR SESSION)
​​​​​​​
 US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.32% (+0.00), volume: $2.469T
• Broad General Collateral Rate (BGCR): 4.32% (+0.01), volume: $1.027T
• Tri-Party General Collateral Rate (TCR): 4.32% (+0.01), volume: $987B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $96B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $273B

FED Reverse Repo Operation

RRP usage climbs to $137.951B this afternoon from $114.114B yesterday. Usage had fallen to $54.772B last Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B. The number of counterparties at 42.

MNI PIPELINE: Corporate Bond Update: $5.7B to Price Tuesday

• Date $MM Issuer (Priced *, Launch #)
• 04/22 $2B *State Street $700M 3NC2 +73, $300M 3NC2 SOFR+95, $1B 5Y +85
• 04/22 $1.85B *Kinder Morgan $1.1B 5Y +120, $750M 10Y +150
• 04/22 $1.1B *NY Life Global $700M 3Y +60, $400M 3Y SOFR+88
• 04/22 $750M #Brookfield Asset Management 10Y +140
• 04/22 $Benchmark OCP 5Y, +10Y investor calls
• 04/22 $Benchmark Rentokil investor calls

MNI BONDS: EGBs-GILTS CASH CLOSE: OATs Underperform, UK Curve Bull Steepens

European FI had a constructive session in the return from a 4-day holiday Tuesday.

• Shrugging off Monday's US Treasury weakness, curves bull steepened early, continuing from Thursday's pre-holiday, post-ECB price action.
• OATs underperformed, with Bloomberg reporting that President Macron is considering calling a snap legislative election in France as soon as the autumn.
• In other developments, BOE's Greene sounded less hawkish on the rate outlook compared with her previous appearances, helping UK rate cut pricing deepen, while Eurozone flash April consumer confidence printed the weakest since November 2023.
• Yields saw a modest spike in the minutes ahead of the cash close on a Bloomberg report that US Treasury Secretary Bessent expects a de-escalation in US-China trade tensions.
• The UK curve bull steepened sharply, with Germany's bull flattening. Periphery EGB spreads were flat/slightly tighter to Bund.
• Tuesday's calendar highlight is flash April PMIs, while we also get UK public sector net borrowing data and an appearance by BOE's Pill, Bailey and Breeden.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.5bps at 1.661%, 5-Yr is down 3.7bps at 1.982%, 10-Yr is down 2.9bps at 2.443%, and 30-Yr is down 3.7bps at 2.859%.
• UK: The 2-Yr yield is down 9bps at 3.83%, 5-Yr is down 6.4bps at 3.98%, 10-Yr is down 2.1bps at 4.545%, and 30-Yr is up 2.9bps at 5.368%.
• Italian BTP spread down 0.7bps at 116.6bps / French OAT up 1bps at 77.5bps   

MNI FOREX: Significant Risk Recovery Places US Dollar on Firmer Footing

• Monday’s sharp extension of greenback weakness prompted the USD index to print fresh 3-year lows below the 98.00 mark. Despite an initial selloff on Tuesday, these lows remained untested and the subsequent powerful rebound for risk sentiment has provided a solid boost to the dollar, rising against all G10 peers on the session as we approach the APAC crossover.
• Despite the meagre 0.3% advance on the session, a lot of the commentary has been centred around USDJPY, which briefly printed below the psychological 140.00 mark. The pair’s selloff did fall short of the September lows, located at 139.58 – as this area appears to have assisted the short-term recovery, with spot consolidating around the 140.70 mark for much of the session, before catching an additional bid on the latest Bessent headlines on a China deal being possible - to reach session highs above 141.30. Resistance remains much further out at 143.28 initially, the April 16 high.
• Low liquidity moves on Monday may have exacerbated the price action for the dollar, and the powerful turnaround for US equities on Tuesday might suggest that a lot of bad news was priced into the market, leaving the greenback susceptible to a short-term correction. USDCHF has risen 1.1% to 0.8180 in sympathy, while EURUSD has extended its pullback to 1.1435.
• The close linkage between US-tied assets means the higher beta currencies in G10 have relatively underperformed, with the likes of AUD, NZD and GBP remaining moderately lower on the Tuesday. It is worth noting that a negative close for GBPUSD today would halt a consecutive winning streak of ten days for the pair. Support will be found at the prior breakout at 1.3207.
• Wednesday’s calendar will be highlighted by flash European PMIs as markets also eagerly await any Fed speak following Trump’s vociferous attacks on the central bank.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
23/04/2025	0600/0700	***	GB	Public Sector Finances
23/04/2025	0630/0730		GB	DMO remit revision following FY24/25 CGNCR
23/04/2025	0715/0915	**	FR	S&P Global Services PMI (p)
23/04/2025	0715/0915	**	FR	S&P Global Manufacturing PMI (p)
23/04/2025	0730/0930	**	DE	S&P Global Services PMI (p)
23/04/2025	0730/0930	**	DE	S&P Global Manufacturing PMI (p)
23/04/2025	0800/1000	**	EU	S&P Global Services PMI (p)
23/04/2025	0800/1000	**	EU	S&P Global Manufacturing PMI (p)
23/04/2025	0800/1000	**	EU	S&P Global Composite PMI (p)
23/04/2025	0800/1000		EU	ECB Wage Tracker
23/04/2025	0830/0930	***	GB	S&P Global Manufacturing PMI flash
23/04/2025	0830/0930	***	GB	S&P Global Services PMI flash
23/04/2025	0830/0930	***	GB	S&P Global Composite PMI flash
23/04/2025	0900/1100	**	EU	Construction Production
23/04/2025	0900/1100	*	EU	Trade Balance
23/04/2025	1030/1130		GB	BOE's Pill speech at University of Leeds
23/04/2025	1100/0700	**	US	MBA Weekly Applications Index
23/04/2025	1300/0900		US	Chicago Fed's Austan Goolsbee
23/04/2025	1330/0930		US	St. Louis Fed's Alberto Musalem
23/04/2025	1330/0930		US	Fed Governor Christopher Waller
23/04/2025	1345/0945	***	US	S&P Global Manufacturing Index (Flash)
23/04/2025	1345/0945	***	US	S&P Global Services Index (flash)
23/04/2025	1400/1000	***	US	New Home Sales
23/04/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
23/04/2025	1530/1130	**	US	US Treasury Auction Result for 2 Year Floating Rate Note
23/04/2025	1700/1300	*	US	US Treasury Auction Result for 5 Year Note
23/04/2025	1715/1815		GB	BOE's Bailey at Institute of International Finance
23/04/2025	1800/1400		US	Fed Beige Book
23/04/2025	1800/1900		GB	BOE's Breeden on Monetary Policy and Financial Stability
23/04/2025	1915/2115		EU	ECB's Lane in panel on Central Bankers' Dilemmas Amid Changing Liquidity
23/04/2025	1945/2145		EU	ECB's Cipollone in panel on Tokenization and the Financial System
23/04/2025	2230/1830		US	Cleveland Fed's Beth Hammack