MNI ASIA OPEN: Eager For Tariff Negotiations to Begin

EXECUTIVE SUMMARY

• MNI BRIEF: Kugler Says Fed Is Keeping An Eye On Inflation
• MNI TARIFFS: Trump Administration Officials Debating Exporter Tax Credit - Bloomberg
• MNI US: Trump Would Veto Legislation To Rein In President's Tariff Powers - Axios
• MNI EU: Foreign Affairs Council Meets To Discuss Response To US Tariffs
• MNI US DATA: Loan Demand Pulls Back In Dallas Survey, But Still Stronger Than 23-24

US

MNI BRIEF: Kugler Says Fed Is Keeping An Eye On Inflation

Federal Reserve Governor Adriana Kugler Monday said the central bank will be keeping an eye on the impacts of the administration's tariffs on inflation, but acknowledged risks to economic growth down the road. "We have one tool to meet these two goals, which means if we tighten policy we may weaken the economy. If we ease policy, on the other hand, we may drive inflation higher," she said at a Harvard University event. "We have to be very careful in how we navigate this period. But my the takeaway is that right now inflation has been more pressing as far as the effects of tariffs that we're already seeing and maybe this front loading is going to help, at least in terms of keeping economic activity at the beginning of the year."

NEWS

MNI TARIFFS: Trump Administration Officials Debating Exporter Tax Credit - Bloomberg

There’s been a mildly negative but slow to build reaction in equity indices since the below story, potentially because it signals another lack of off-ramp on tariff policy. It also followed shortly after surprisingly weak consumer credit data. Bloomberg writes that “Trump administration officials are debating the merits of creating a new exporter tax credit, a move that offers an implicit acknowledgment of the harm that the White House’s tariff policies risk inflicting on US companies.” See the full Bloomberg story here.

MNI US: Trump Would Veto Legislation To Rein In President's Tariff Powers - Axios

Axios reports that President Donald Trump would veto legislation introduced by Senators Maria Cantwell (D-WA) and Chuck Grassley (R-IA) that would rein in the president’s authority to impose tariffs unilaterally. The bill currently has seven Republican signatures. Rep. Don Bacon (R-NE) has introduced a companion bill in the House that is also likely to attract a handful of Republican signatures. The legislation would need a two-thirds majority in both chambers to override a presidential veto.

MNI TARIFFS: Tough But Fair Parameters Are Being Set - Trump

US President Donald Trump has issued a statement on Truth Social appearing to suggest he is open to trade deals if 'fair parameters' are met. Trump said: "Countries from all over the World are talking to us. Tough but fair parameters are being set. Spoke to the Japanese Prime Minister this morning. He is sending a top team to negotiate! They have treated the U.S. very poorly on Trade. They don’t take our cars, but we take MILLIONS of theirs. Likewise Agriculture, and many other “things.” It all has to change, but especially with CHINA!!!"

MNI TARIFFS: Trump 'Always Willing To Listen' But US Needs 'Fairness' - Navarro

White House Senior Trade Counsellor, Peter Navarro, told CNBC that US President Donald Trump is “always willing to listen” to countries who want to negotiate on trade. Navarro said: “Countries seeking tariff relief need to lower non-tariff barriers… We want fairness from trading partners.” Whilst, his comments suggest that administration is open to negotiations to lower tariffs, Navarro added that, “tariffs will pay for the biggest tax cut in American history,” indicating that he views at least some of the tariffs as durable policy.

MNI EU: Foreign Affairs Council Meets To Discuss Response To US Tariffs

The Foreign Affairs Council meets in Luxembourg in its trade format, where ministers will discuss what the Union's response to US President Donald Trump's imposition of market-rattling tariffs on imports should be. Late on 4 April, Trade Commissioner Maros Sefcovic confirmed that he had held talks with US Commerce Secretary Howard Lutnick and USTR Jamieson Greer, posting on X: "A frank 2h exchange w Sec. [Lutnick] and Amb.[Greer]. I was clear: US tariffs are damaging, unjustified. The [EU-US] trade relationship needs a fresh approach. The EU's committed to meaningful negotiations but also prepared to defend our interests. We stay in touch."

MNI GERMANY: Merz Facing Pressure On Economy & Immigration In Coalition Talks

Reuters reporting comments from chancellor-in-waiting Friedrich Merz regarding the situation in financial markets, calls the situation "dramatic" and it "threatens to get worse, [it is] therefore more urgent than ever to restore international competitiveness...competitiveness must be at the centre of coalition talks." Talks between Merz's centre-right Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU), and the centre-left Social Democrats (SPD) on forming a governing coalition continue. 

MNI EU: German Econ Min-EU In 'Strong Position' To Respond To US Tariffs

Speaking ahead of a meeting of the Foreign Affairs Council on trade, German Economy Minister Robert Habeck says that the US' "Talks of reciprocal tariffs are simply false". Calls the White House's method of calculating tariffs "nonsense". Says the EU "is in a strong position to respond to US tariffs...[the EU] must respond calmly and firmly...Europe must not let itself be divided...Strength comes from unity." 

MNI US TSYS: Heavy Volumes, Exceedingly Wide Ranges As Tariff Negotiations Proceed

• Treasuries look to finish weaker, low end of very wide range (TYM5 111-15.5 low vs. 114-10 overnight high) as markets started to anticipate easing impact from last week's sweeping tariff announcement as more countries look to negotiate or at least respond to the Trump administrations trade policy.
• Heavy volumes (TYM5 over 5.3M after the bell) trades -13.5 at 112-02, curves steper: 2s10s +7.370 at 40.989 (32.805 low vs. 45.006 high), 5s30s +4.087 at 74.100.
• Sharp risk-off tone early overnight buoyed Tsys (10Y yield tapped 3.8693% low before bouncing to 4.2122% during morning trade) as stocks gapped lower on the open. Focus squarely on US tariffs and foreign countries response - rates gapped lower midmorning but quickly rebounded after erroneous headline of 90 day tariff delay made the rounds.
• Bbg reported that “Trump administration officials are debating the merits of creating a new exporter tax credit, a move that offers an implicit acknowledgment of the harm that the White House’s tariff policies risk inflicting on US companies.”
• Dearth of economic data today and tomorrow, focus on Wednesday's March FOMC minutes, CPI data on Thursday and PPI on Friday.

OVERNIGHT DATA

MNI US DATA: Loan Demand Pulls Back In Dallas Survey, But Still Stronger Than 23-24

The latest Dallas Fed banking survey, collected just shy of Liberation Day tariffs, showed a sharp deceleration in loan volume and demand growth compared to responses from six weeks ago but it was still healthier than readings through 2023-24. The balance for changes in lending standards meanwhile was similar to previous readings. 

• The survey was conducted Mar 24-Apr 2 and so offers a useful update on lending trends although does of course miss out on the fallout from the significant escalation in tariffs after the Apr 2 “Liberation Day” announcement.
• Loan demand: current balance at 6.1 after 30 for its lowest since Nov but still better than a string of all but one negative readings through Oct 2022 – Nov 2024; future balance at 27.7 after 56.3 for lowest since Aug 2024.
• NPLs: current balance +19.4 after +15.7 in mid-Feb survey (highest since Nov and before that Jul). The future balance increased to +22.3 after +14.1 for its highest since Aug 2024 but it’s still well below recent highs of a net 55% in 2023 expecting NPLs to increase over the next six months.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 493.07 points (-1.29%) at 37814.14
S&P E-Mini Future down 28.5 points (-0.56%) at 5078.5
Nasdaq down 36.9 points (-0.2%) at 15551.09
US 10-Yr yield is up 17.6 bps at 4.1701%
US Jun 10-Yr futures are down 37/32 at 111-28.5
EURUSD down 0.0023 (-0.21%) at 1.0933
USDJPY up 0.9 (0.61%) at 147.82
WTI Crude Oil (front-month) down $0.94 (-1.52%) at $61.02
Gold is down $59.41 (-1.96%) at $2979.12

European bourses closing levels:
EuroStoxx 50 down 221.9 points (-4.55%) at 4656.41
FTSE 100 down 352.9 points (-4.38%) at 7702.08
German DAX down 852.1 points (-4.13%) at 19789.62
French CAC 40 down 347.83 points (-4.78%) at 6927.12

US TREASURY FUTURES CLOSE

3M10Y +16.34, -10.549 (L: -36.091 / H: -5.691)
2Y10Y +7.513, 41.132 (L: 32.805 / H: 45.006)
2Y30Y +9.179, 84.262 (L: 74.493 / H: 91.912)
5Y30Y +3.722, 73.735 (L: 68.721 / H: 81.655)
Current futures levels:
Jun 2-Yr futures down 5.625/32 at 103-28.625 (L: 103-20.875 / H: 104-25.625)
Jun 5-Yr futures down 20.25/32 at 108-22.5 (L: 108-10.5 / H: 110-22.25)
Jun 10-Yr futures down 1-04.5/32 at 111-29 (L: 111-15.5 / H: 114-10)
Jun 30-Yr futures down 3-04/32 at 117-15 (L: 117-04 / H: 122-05)
Jun Ultra futures down 4-11/32 at 122-17 (L: 121-28 / H: 128-19)

MNI US 10YR FUTURE TECHS: (M5) Impulsive Bull Cycle

• RES 4: 115-00+ High Oct 1 ‘24
• RES 3: 114-29+ 2.000 proj of the Jan 13 - Feb 7 - Feb 12 price swing
• RES 2: 114-16   2.000 proj of the Jan 13 - Feb 7 - Feb 12 price swing  
• RES 1: 114-10   Intraday high
• PRICE:‌‌ 112-00 @ 1537 ET Apr 7
• SUP 1: 111-15   Intraday low
• SUP 2: 111-08   20-day EMA
• SUP 3: 110-18+ 50-day EMA
• SUP 4: 110-06   Low Mar 27    

Treasury futures traded sharply higher last week and in the process confirmed a clear break of resistance at 112-01, the Mar 4 high. The breach confirms a resumption of the uptrend that started mid-January. The move higher sets the scene for an extension towards the 114-16 next, a Fibonacci projection. Initial firm support lies at 112-01, the Mar 4 high. The contract is oversold, a pullback would allow this set-up to unwind.

SOFR FUTURES CLOSE

Jun 25 steady at 96.075
Sep 25 -0.010 at 96.410
Dec 25 -0.040 at 96.615
Mar 26 -0.060 at 96.750
Red Pack (Jun 26-Mar 27) -0.11 to -0.08
Green Pack (Jun 27-Mar 28) -0.15 to -0.12
Blue Pack (Jun 28-Mar 29) -0.16 to -0.15
Gold Pack (Jun 29-Mar 30) -0.17 to -0.165

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

• 1M -0.01905 to 4.30079 (-0.00381 total last wk)
• 3M -0.05139 to 4.20759 (-0.03863 total last wk)
• 6M -0.11275 to 4.01277 (-0.09009 total last wk)
• 12M -0.15537 to 3.70806 (-0.18943 total last wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.35% (-0.04), volume: $2.587T
• Broad General Collateral Rate (BGCR): 4.33% (-0.04), volume: $1.005T
• Tri-Party General Collateral Rate (TCR): 4.33% (-0.03), volume: $968B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $95B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $269B

FED Reverse Repo Operation

RRP usage retreats to $148.146B this afternoon from $184.499B on Friday. Usage had surged to the highest level since December 31, 2024 last Monday, March 31: $399.167B. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 30.

MNI BONDS: EGBs-GILTS CASH CLOSE: Long-End Gilts Lead Broader Weakness

European yields rose Monday despite another sharp drop in equities, with Gilts badly underperforming Bunds.

• Price action picked up more or less where it left off at the end of last week, with a flight to safety on continued concerns over the fallout from large US tariffs due to come into effect this week.
• However, yields reversed higher as equities found a base. UK long end yields saw their biggest one-day rise since October 2022, and one of the few biggest in the last decade, with 30Ys up 20+bp. There was no clear driver for this underperformance, though the APF operation from the BoE saw poor reception.
• Data was largely shrugged off: German industrial production came in on the soft side.
• The German curve twist steepened - Schatz and Bobl being some of the few instruments to strengthen across the European space - with the UK's bear steepening.
• Periphery/semi-core EGBs widened across the board, though closed off the early wides as equities closed off their lows.
• Tuesday's schedule is on the light side in terms of data, though there will be multiple central banker appearances including BOE's Lombardelli and ECB's Holzmann and de Guindos.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 5bps at 1.777%, 5-Yr is down 1.8bps at 2.11%, 10-Yr is up 3.5bps at 2.613%, and 30-Yr is up 3.7bps at 3.016%.
• UK: The 2-Yr yield is up 6.5bps at 3.999%, 5-Yr is up 11.6bps at 4.134%, 10-Yr is up 16.7bps at 4.615%, and 30-Yr is up 20.5bps at 5.321%.
• Italian BTP spread up 6.3bps at 125.3bps  / Greek up 3.8bps at 92.9bps 

MNI FOREX: Higher US Yields Spark USDJPY Rebound, AUDUSD Extends Slide

• The gap lower for major equity benchmarks at the open provided an extension of Friday themes in FX markets, that of weakness for the higher beta currencies, and a firm bid for the low-yielders such as JPY and CHF. Notably, the 3-day slide for AUDCHF reached as much as 8.7% at its lowest point.
• However, equity indices are well off their worst levels in an extremely choppy session, providing a boost to the likes of USDJPY and USDCHF. Specifically, USDJPY now trades 0.65% higher as we approach the APAC crossover, with the pair benefitting from the bear steepening move for US treasuries. 30-year US yields have risen as much as 17bps on the session.
• This dynamic in US fixed income has supported the greenback, with the USD index around 0.4% higher Monday as markets also assess the potential inflationary impacts of the tariff related action. Regarding this, uncertainty has risen Monday as Trump threatened to implement an additional 50% import tax on China, as retaliatory rhetoric persists between US and Chinese administrations.
• China related concerns have kept AUD and NZD under pressure, with AUDUSD extending below 0.6000 to the lowest level since the early onset of the pandemic. GBPUSD also slides back below 1.2750 to a fresh 5-week low. Additionally, ongoing weakness for crude futures has placed the Norwegian Krone under considerable pressure, with USDNOK rising 2.3% at typing, around 11.01. Notably NOKSEK extended this year’s decline to around 6%, below 0.9150.
• In emerging markets, high beta ZAR and COP underperform, falling comfortably over 2%. Domestic political concerns continue to underpin the latest ZAR weakness, however, the additional slide for the commodity complex will be impacting both these currencies in tandem.
• The economic calendar remains lighter this week, as markets await US inflation on Thursday.

TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
08/04/2025	0500/1400		JP	Economy Watcher's Survey
08/04/2025	0645/0845	*	FR	Foreign Trade
08/04/2025	0900/1000	**	GB	Gilt Outright Auction Result
08/04/2025	0900/1100		EU	ECB's De Guindos At Spanish Banking Association Meeting
08/04/2025	1000/0600	**	US	NFIB Small Business Optimism Index
08/04/2025	1255/0855	**	US	Redbook Retail Sales Index
08/04/2025	1400/1000	*	CA	Ivey PMI
08/04/2025	1400/1600		EU	ECB's Cipollone at ECON Hearing On Digital Euro
08/04/2025	1600/1700		GB	BoE's Lombardelli on 'What can the UK learn from the US'
08/04/2025	1700/1300	***	US	US Note 03 Year Treasury Auction Result
08/04/2025	1800/1400		US	San Francisco Fed's Mary Daly
09/04/2025	-		NZ	Reserve Bank of New Zealand Meeting
09/04/2025	0200/1400	***	NZ	RBNZ official cash rate decision