MNI ASIA OPEN: Fed Chair Powell Has Policy In a Good Place

EXECUTIVE SUMMARY

• MNI: Fed Holds Rates at 4.25-4.5%, Says Economy Still Solid
• MNI FED BRIEF: Powell: Must Prevent Persistent Inflation
• MNI TARIFFS: Bessent Refuses To Be Drawn On Timeline For Trade Deal Announcements
• MNI US DATA: Mortgage Rate Lending Standards Tighten A Little Further

US

MNI: Fed Holds Rates at 4.25-4.5%, Says Economy Still Solid

The Federal Reserve held interest rates steady for a third meeting Wednesday, opting to take a wait-and-see stance as it assesses the effect of gyrating trade policies on the economy’s prospects and the path of inflation. Uncertainty about the economic outlook has increased further and risks to both sides of the Fed's dual mandate have risen, officials said. But for now, growth remains on solid footing. 

“Although swings in net exports have affected the data, recent indicators suggest that economic has continued to expand at a solid pace," the FOMC said in a statement, adding that "the risks of higher unemployment and higher inflation have risen."

U.S. GDP posted its first negative reading in three years during the first quarter, shrinking 0.3%, but underlying demand held up generally well. The latest employment report showed a stronger-than-expected gain of 177,000 jobs in April while the jobless rate held steady at 4.2%. The statement repeated that the labor market is "solid" and inflation "somewhat elevated."

MNI BRIEF: Fed's Powell: Must Prevent Persistent Inflation

Federal Reserve Chair Jerome Powell said Wednesday the central bank must work to prevent a one-time upward hit to prices from tariffs from turning into more persistent inflation pressures, adding officials are well positioned to wait for now before taking any action. 

NEWS

MNI TARIFFS: Bessent Refuses To Be Drawn On Timeline For Trade Deal Announcements

US Treasury Secretary Scott Bessent has stated in testimony to the House Financial Services Committee that some trade negotiations are in “advanced stages” but refused to be drawn on a timeline for announcing deals, despite telling CNBC that deals could be announced as soon as this week. 

• Bessent said revealing details of specific trade deals, including previewing announcements, would be “detrimental to the United States,” as negotiations may “still be in progress.” Bessent added, when pressed: “I’m happy to say there are negotiations going on [but] I’m not going to reveal the details.”

MNI SECURITY: US VP Vance Talks On Ukraine, China & EU Relations, Iran

Speaking at an MSC Q&A in Washington, D.C., Vice President JD Vance says that the US and Europe "are on the same team", but that "the security posture of the last 20 years is not adequate for the next 20 years." On the war in Ukraine. Vance says, "We think the Russians are asking for too much". He acknowledges that "there is a big gulf between where the Russians and Ukrainians are", but that it is "probably impossible" to mediate between the two without "at least some direct negotiation". 

MNI US: House Ways And Means Ctte Could Mark Up Tax Portion Of GOP Megabill On Tues

Caitlin Reilly at Roll Call reporting on X that the House Ways and Means Committee is tentatively scheduled to mark up the tax portion of the 'Big Beautiful' Republican reconciliation bill on Tuesday, May 13. Reilly: "Hearing from multiple sources Ways and Means is tentatively planning for next Tuesday to mark up its portion of the budget reconciliation bill. It hasn't been formally announced and with so much uncertainty around the rest of the package, this of course could change."

MNI SECURITY: NYT-Indian Official Confirms 3 Aircraft 'Crashed' As Tensions Escalate

NYT reports "One Indian official confirmed the crash of three aircraft, but cautioned that the reasons were not clear. Two other Indian security officials confirmed reports that some Indian aircraft had gone down, but would not elaborate on the details." This is seemingly the first (admittedly anonymous) confirmation from the Indian side that some of its jets were lost as part of the airstrikes against what India claims were terrorist targets in Pakistan linked to the attack that killed 26 civilians in Indian-administered Kashmir in late April. 

MNI FRANCE: Poll Showing Bardella Leading, No Le Pen Sows Discord In RN-Le Monde

An opinion poll carried out by IFOP for the Hexagone Institute think tank has ruffled feathers among mainstream politicians, and the right-wing nationalist Rassemblement National (National Rally, RN) reports Le Monde. Hexagone is affiliated with liberal-conservative entrepreneur Pierre-Edouard Stérin, and its latest poll garnered significant attention for only asking respondents about RN leader Jordan Bardella as the party's presidential candidate, fully excluding three-time candidate Marine Le Pen. 

MNI GERMANY: Border Control Order Risks Difficult Conversations For Merz w/Polish PM

Bild reports that Germany's Interior Minister Alexander Dobrindt has, on his first day in officee issued an order to halt all undocumented migrants at the country's external borders, even if they make claims for asylum.

US TSYS

MNI US TSYS: Near Highs After Fed Held Rates Steady, Remain Patient

• Treasuries finish higher after the Federal Reserve held rates steady at 4.25-4.5%, reiterating the patience as the US economy is still solid. "The labor market is solid. Inflation is low. We can afford to be patient as things unfold. There's no real cost to our waiting at this point.
• Powell added that while there has been some "souring sentiment ... the shock from tariffs hasn’t hit yet. We’re going to be looking at both sentiment and real economic data. It’s not at all clear what the appropriate response for monetary policy is. Unemployment hasn’t gone up, job creation is fine and layoffs aren’t increasing in any kind of impressive way," Powell added.
• Tsy Jun'25 10Y futures are +7 at 111-17 after the bell (111-04 low/111-22 high), still inside technical support and resistance levels. Curves mixed, 2s10s -1.551 at 49.222, 5s30s +.578 at 90.707.
• Cross asset update: Bbg US$ index +6.41 at 1222.75; stocks firmer after Tump rescinds global chip curbs (SPX eminis +26.5 at 5652.50), Gold weaker (-63.20 at 3368.51), Crude lower (WTI -1.13 at 57.96).

OVERNIGHT DATA

MNI: US MAR CONSUMER CREDIT +$10.2B

• MNI: US MAR CONSUMER CREDIT +$10.2B
• US MAR REVOLVING CREDIT +$1.9B
• US MAR NONREVOLVING CREDIT +$8.3B

MNI US DATA: Mortgage Rate Lending Standards Tighten A Little Further

MBA composite mortgage applications unsurprisingly received a boost from lower rates this week although there was limited passthrough to mortgage rates in a further tightening of lending standards. Composite applications increased 11% last week (sa), leaving them back close to where they were in late March having jumped 20% in the first week of April as rates tumbled following Apr 2 tariff announcements before subsequently declining 23% over the next three weeks.

• The breakdown by new purchases and refis follows a similar pattern, just with refis mostly more volatile.
• A reminder of relative levels: composite applications at 53% of 2019 levels, new purchases at 63% and refis at 42%.
• The 30Y conforming rate fell 5bp last week to 6.84% (lowest since week of Apr 11) vs a 13bp decline in the average 10Y swap rate through the week (although the average of 3.69% came with a wide range of 3.59-3.79%).
• The 30Y conforming to 10Y swap spread of 315bp is up from sub-280bps in late February for its highest since Feb 2024. 

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 284.97 points (0.7%) at 41113.97
S&P E-Mini Future up 22 points (0.39%) at 5648.5
Nasdaq up 48.5 points (0.3%) at 17738.16
US 10-Yr yield is down 1.9 bps at 4.2752%
US Jun 10-Yr futures are up 7.5/32 at 111-17.5
EURUSD down 0.0073 (-0.64%) at 1.1297
USDJPY up 1.51 (1.06%) at 143.96
WTI Crude Oil (front-month) down $1.14 (-1.93%) at $57.95
Gold is down $63.72 (-1.86%) at $3368.10

European bourses closing levels:
EuroStoxx 50 down 33.19 points (-0.63%) at 5230.19
FTSE 100 down 38.09 points (-0.44%) at 8559.33
French CAC 40 down 70.08 points (-0.91%) at 7626.84

US TREASURY FUTURES CLOSE

3M10Y -2.859, -5.41 (L: -6.441 / H: 0.94)
2Y10Y -1.72, 49.053 (L: 47.269 / H: 51.367)
2Y30Y -1.402, 99.617 (L: 95.585 / H: 100.78)
5Y30Y +0.972, 91.101 (L: 87.082 / H: 91.229)
Current futures levels:
Jun 2-Yr futures up 0.25/32 at 103-23.75 (L: 103-21 / H: 103-25.25)
Jun 5-Yr futures up 3.25/32 at 108-20 (L: 108-11.25 / H: 108-23) 
Jun 10-Yr futures up 7.5/32 at 111-17.5 (L: 111-04 / H: 111-22)
Jun 30-Yr futures up 19/32 at 115-11 (L: 114-18 / H: 115-19)
Jun Ultra futures up 22/32 at 119-6 (L: 118-10 / H: 119-19)

MNI US 10YR FUTURE TECHS: (M5) Trading Closer To Its Recent Lows

• RES 4: 113-22   1.382 proj of the Apr 11 - 16 - 22 price swing
• RES 3: 113-04   76.4% retracement of the Apr 7 - 11 bear leg
• RES 2: 112-20+ High May 1 and key new-term resistance
• RES 1: 112-01+ High May 2
• PRICE:‌‌ 111-12+ @ 1215 ET May 7
• SUP 1: 110-27+ Low May 6 
• SUP 2: 110-16+/109-08 Low Apr 22 / 11 and the bear trigger
• SUP 3: 110-00   100-dma
• SUP 4: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle

Treasury futures are trading closer to their recent lows and the latest pullback undermines the recent bull cycle. The contract has breached the 20-day EMA, and pierced support at the 50-day EMA, at 110-31. A clear break of this average would strengthen a bearish threat and expose 110-16+, Apr 22 low. For bulls, price needs to trade above key short-term resistance at 112-20+, the May 1 high, to reinstate a bullish theme.

SOFR FUTURES CLOSE

Jun 25 -0.020 at 95.775
Sep 25 -0.025 at 96.140
Dec 25 -0.015 at 96.460
Mar 26 +0.005 at 96.690
Red Pack (Jun 26-Mar 27) +0.020 to +0.020
Green Pack (Jun 27-Mar 28) +0.015 to +0.025
Blue Pack (Jun 28-Mar 29) +0.025 to +0.030
Gold Pack (Jun 29-Mar 30) +0.035 to +0.045

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

• Secured Overnight Financing Rate (SOFR): 4.32% (-0.01), volume: $2.620T
• Broad General Collateral Rate (BGCR): 4.31% (+0.00), volume: $1.075T
• Tri-Party General Collateral Rate (TCR): 4.31% (+0.00), volume: $1.035T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $120B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $295B

FED Reverse Repo Operation

RRP usage climbs to $154.859B this afternoon from $129.858B yesterday, total number of counterparties at 46. 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.

MNI PIPELINE: Corporate Bond Roundup: Athene Global Funding 2Pt on Tap

• Date $MM Issuer (Priced *, Launch #)
• 05/07 $Benchmark Athene Global Funding 3Y +105, 3Y SOFR
• $24.9B Priced Tuesday led by $5B BoA 3pt. Total issuance for the week at $38.7B

MNI BONDS: EGB-GILTS CASH CLOSE: Curves Bull Flatten Ahead Of BOE Tomorrow

The German and UK cash curves bull flattened Wednesday, with Bunds lightly outperforming Gilts. 

• There was no obvious headline trigger for the bid that began mid-morning, but strength extended through the session as equities and oil/gas benchmarks moved away from highs.
• 10-year Bund yields ended the session down 6.5bps to 2.47%, with Gilts down 5.4bps to 4.46%.
• The space largely brushed aside a Reuters sources article detailing German defence spending plans, with the piece lacking clarity on whether the touted E60bln of additional spending is for 2025 alone or split across the current parliamentary term.
• Today’s LT OAT and 5-year Gilt auctions saw solid results.
• 10-year EGB spreads to Bunds tightened through the morning, but the moves partially unwound in the afternoon alongside continued equity weakness.
• Eurozone data (strong German factory orders, weak Italian retail sales and in-line Eurozone retail sales) were not market movers.
• Tomorrow’s focus is on the BOE decision. An outcome other than a 25bp cut would be surprising but there will be a number of things to watch: any changes to the guidance and the inflation / growth forecast changes, the vote split and the introduction of new scenarios. (MNI preview here).

MNI FOREX: Greenback Extends Session Highs as Fed Awaits Further Clarity

• The US dollar is firmer on Wednesday, as the USD Index continues a consolidatory phase between 99.00/100.00. Losses in G10 have been most pronounced for the likes of JPY, AUD and NZD, while the Swiss Franc has reversed yesterday’s weakness and is among the best performers Wednesday.
• USDJPY remained the key focus for FX volatility on Wednesday, where initially a positive reaction to US/China talks progress prompted a firm recovery from the 142.40 lows to around 143.20 overnight in Asia. Following the release of the Fed statement, some dovish caveats and comments from Trump on not rolling back China tariffs saw USDJPY briefly slip back below 143.00. However, this sentiment was short-lived, and Chair Powell’s nod to a patient approach and awaiting further clarity prompted a swift reversal to fresh session highs. The pair is pushing 143.85 as we approach the APAC crossover.
• For AUDUSD, today’s 1.0% decline stalls a prior 3-day winning streak that prompted the pair to print fresh recovery highs at 0.6515. The recent breach of 0.6450, the Apr 29 high, confirms a resumption of the uptrend and maintains the current sequence of higher highs and higher lows.
• Late gains for the dollar helped EURUSD slip to session lows just above the 1.13 handle, whole cable also now trades below 1.33.
• The Swiss Franc notably outperforms on a relative basis. We have noted that recent recovery highs for USDCHF matched perfectly with the prior breakdown point of 0.8333, the 2023 low, likely helping the resumption of weakness in recent sessions. Furthermore, the pair briefly dipped below a couple of daily lows from late April around the 0.8200 mark, keeping bearish conditions firmly intact for now.
• Focus on Thursday turns to other G10 central banks, with decisions from Sweden, Norway and the Bank of England all scheduled. Jobless claims highlight the US calendar.

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
08/05/2025	0600/0800	**	DE	Trade Balance
08/05/2025	0600/0800	**	DE	Industrial Production
08/05/2025	0700/0900	**	ES	Industrial Production
08/05/2025	0730/0930	***	SE	Riksbank Interest Rate Decison
08/05/2025	0800/1000	***	NO	Norges Bank Rate Decision
08/05/2025	1102/1202	***	GB	Bank Of England Interest Rate
08/05/2025	1102/1202	***	GB	Bank Of England Interest Rate
08/05/2025	1130/1230		GB	BOE Press Conference
08/05/2025	1230/0830	***	US	Jobless Claims
08/05/2025	1230/0830	**	US	WASDE Weekly Import/Export
08/05/2025	1230/0830	**	US	Preliminary Non-Farm Productivity
08/05/2025	1300/1400		GB	Decision Maker Panel data
08/05/2025	1400/1000		CA	BOC Financial Stability Report and Financial System Survey
08/05/2025	1400/1000	**	US	Wholesale Trade
08/05/2025	1430/1030	**	US	Natural Gas Stocks
08/05/2025	1500/1100		CA	BOC Governor Macklem presser Financial System Review
08/05/2025	1500/1100	**	US	NY Fed Survey of Consumer Expectations
08/05/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
08/05/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
08/05/2025	1700/1300	***	US	US Treasury Auction Result for 30 Year Bond
08/05/2025	1700/1300	*	US	US Treasury Auction Result for Cash Management Bill
09/05/2025	2330/0830	**	JP	average wages (p)
09/05/2025	2330/0830	**	JP	Household spending