MNI ASIA OPEN: Fed Enters Policy Blackout, Tsy Yields Rising

EXECUTIVE SUMMARY

• MNI FED: Musalem Reiterates Hawkish Stance, Notes Consumption Tailwinds
• MNI INTERVIEW: US And China Lack Power To Disentangle- Sheard
• MNI US DATA: Manheim Used Car Prices Slip In Mid-Month Estimate

US

MNI FED: Musalem Reiterates Hawkish Stance, Notes Consumption Tailwinds

St Louis Fed’s Musalem (’25 voter, hawk) broadly reiterated recent comments around there being little room to ease monetary policy before it becomes overly loose, with policy somewhere between modestly restrictive and neutral. “I could support a path with an additional reduction in the policy rate if there are further risks to the labor market that emerge,” and if the risks for persistent inflation remain contained, Musalem said Friday during an event in Washington. “I do think we need to not be on a preset course.”

NEWS

MNI INTERVIEW: US And China Lack Power To Disentangle- Sheard

U.S. and China trade connections are too strong for their economies to disentangle, but they also lack the political ability to make the deep changes to significantly ease imbalances underlying their tensions, former S&P Global vice chairman Paul Sheard told MNI. “I don’t think governments have strong levers that they can pull. You can’t just suddenly overnight turn China into a consumption-led economy. You can’t suddenly overnight change the basic fabric of the U.S. economy,” he said in an interview Thursday in Washington.

MNI RUSSIA: Kremlin Spox-Many Issues To Be Addressed Before Trump-Putin Summit

Reuters reports comments from Kremlin spox Dmitry Peskov, the first major set of comments from Moscow since US President Donald Trump's confirmation that he would meet with President Vladimir Putin in Hungary in the near term. Peskov says it will release details of a call between Putin and Hungarian PM Viktor Orban shortly. Peskov says that the summit 'could take place within two weeks or later' [effectively giving little indication of actual timing].

MNI MIDEAST: Trump-Expect An Expansion Of Abraham Accords, Hopes To Include Saudi

Speaking to Fox Business, US President Donald Trump says that he expects an expansion of the Abraham Accords (MENA nations recognising the state of Israel) in the near future and that he hopes that Saudi Arabia could be one of the countries to join. Says that if Saudi Arabia signs up to the Accords, other countries in the region will follow.  

US TSYS

US TSYS: Risk Sentiment Improved, Pres Trump Opens Door on China Trade

• Treasuries looked to finish lower, holding narrow range after reversing early gains. Tsys gapped lower after President Trump stated additional tariffs on China are "not sustainable, but that's what the number is. It's probably not, it could stand. They forced me to do that."
• Currently, the Dec'25 10Y contract trades 113-15 (-9) vs. 113-13 low, 10Y yield back over 4% at 4.005 (+.0304). Firm technical support lies below at 112-30, the 20-day EMA.
• St Louis Fed’s Musalem (’25 voter, hawk) broadly reiterated recent comments around there being little room to ease monetary policy before it becomes overly loose, with policy somewhere between modestly restrictive and neutral. “I could support a path with an additional reduction in the policy rate if there are further risks to the labor market that emerge.”
• Projected rate cut pricing has reversed course on the move, softer vs. late Thursday levels (*): Oct'25 at -25.3bp (-25.8bp), Dec'25 at -50.9bp (-52.4bp), Jan'26 at -64.8bp (-67.3bp), Mar'26 at -77.9bp (-81.6bp).
• Reminder - the Federal Reserve enters policy Blackout after midnight tonight. Slow start to next week: Monday's Leading Index suspended until Federal data is released.
• Corporate earning resume in earnest next week, some highlights: Zions Bancorp that took a hit yesterday reports late Monday, Halliburton, PulteGroup, Lockheed Martin, Northrop Grumman, GM, Netflix, Capital One, Texas Inst, AT&T, Alcoa, American Airlines, Valero, Ford, Intel, General Dynamics, Baker Hughes and Procter & Gamble.

OVERNIGHT DATA

MNI US DATA: Manheim Used Car Prices Slip In Mid-Month Estimate

• Manheim wholesale used vehicle prices fell -1.6% M/M from September in the first 15 days of October, as usual on a mix-, mileage- and seasonally adjusted basis. It leaves a gain of just 0.4% from the full month of Oct 2024.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 269.5 points (0.59%) at 46223.91
S&P E-Mini Future up 36 points (0.54%) at 6704.75
Nasdaq up 124.3 points (0.6%) at 22687.75
US 10-Yr yield is up 3.1 bps at 4.005%
US Dec 10-Yr futures are down 8.5/32 at 113-15.5
EURUSD down 0.002 (-0.17%) at 1.1667
USDJPY up 0.08 (0.05%) at 150.51
WTI Crude Oil (front-month) up $0.13 (0.23%) at $57.59
Gold is down $105.49 (-2.44%) at $4221.51

European bourses closing levels:
EuroStoxx 50 down 44.62 points (-0.79%) at 5607.39
FTSE 100 down 81.52 points (-0.86%) at 9354.57
German DAX down 441.2 points (-1.82%) at 23830.99
French CAC 40 down 14.39 points (-0.18%) at 8174.2

US TREASURY FUTURES CLOSE

3M10Y +4.98, 8.032 (L: -1.364 / H: 8.032)
2Y10Y -0.471, 54.343 (L: 53.75 / H: 56.687)
2Y30Y -1.904, 113.898 (L: 113.309 / H: 119.127)
5Y30Y -2.441, 101.062 (L: 100.508 / H: 106.254)
Current futures levels:
Dec 2-Yr futures down 2.5/32 at 104-14 (L: 104-13.375 / H: 104-19.375)
Dec 5-Yr futures down 6/32 at 109-25.5 (L: 109-24 / H: 110-06.5)
Dec 10-Yr futures down 8.5/32 at 113-15.5 (L: 113-13 / H: 114-02)
Dec 30-Yr futures down 12/32 at 118-15 (L: 118-08 / H: 119-11) 
Dec Ultra futures down 15/32 at 122-20 (L: 122-12 / H: 123-25)

MNI US 10YR FUTURE TECHS: (Z5) Trades Through Key Resistance

• RES 4: 115-00+ High Oct 1 ‘24 (cont)
• RES 3: 114-21+ 1.00 proi of the Aug 18 - Sep 11 - 25 price swing
• RES 2: 114-10   High Apr 7 (cont) and a key resistance
• RES 1: 114-02   Intraday high
• PRICE:‌‌ 113-29+ @ 11:00 BST Oct 17
• SUP 1: 113-24   Intraday low
• SUP 2: 112-30   20-day EMA
• SUP 3: 112-18+ 50-day EMA
• SUP 4: 112-06   Low Sep 25

Treasuries remain in a clear bull cycle and today’s gains have resulted in a breach of key resistance at 113-29, the Sep 11 and a bull trigger. This confirms a resumption of the medium-term uptrend. Note that moving average studies are in a bull-mode position and this set-up continues to highlight a dominant uptrend. Sights are on 114-10, the Apr 7 high (cont) and the next key resistance. Firm support lies at 112-30, the 20-day EMA.

SOFR FUTURES CLOSE

Current White pack (Dec 25-Sep 26):
Dec 25 -0.020 at 96.390
Mar 26 -0.040 at 96.640
Jun 26 -0.040 at 96.875
Sep 26 -0.040 at 97.015
Red Pack (Dec 26-Sep 27) -0.05 to -0.045
Green Pack (Dec 27-Sep 28) -0.045 to -0.04
Blue Pack (Dec 28-Sep 29) -0.04 to -0.035
Gold Pack (Dec 29-Sep 30) -0.035 to -0.03

REFERENCE RATES
​​​​​​​
US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.30% (+0.01), volume: $3.045T
• Broad General Collateral Rate (BGCR): 4.25% (+0.00), volume: $1.180T
• Tri-Party General Collateral Rate (TCR): 4.25% (+0.00), volume: $1.143T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.11% (+0.00), volume: $85B
• Daily Overnight Bank Funding Rate: 4.11% (+0.00), volume: $171B

FED Reverse Repo Operation

RRP usage retreats to $4.102B with 6 counterparties this afternoon from $6,960B Thursday. Compares to $3,516B on Tuesday, Oct 13 (lowest level since early April 2021) & this year's high usage of $460.731B on June 30.

MNI PIPELINE: Corporate Bond Update: $8B Morgan Stanley 4Pt Launched

• Date $MM Issuer (Priced *, Launch #)
• 10/17 $8B #Morgan Stanley $2.1B 4NC3 +68, $400M 4NC3 SOFR+92, $2.5B 6NC5 +78, $3B 11NC10 +90

EGBS

The Dec 25 Bund future is down 4 ticks at 129.96, having traded in a range of 129.87-130.59 today.
The 2-Yr yield is unchanged at 1.909%, 5-Yr is up 0.9bps at 2.168%, 10-Yr is up 1bps at 2.58%, and 30-Yr is up 1.6bps at 3.175%.

ITALY
The Dec 25 BTP future is down 17 ticks at 121.46, having traded in a range of 121.41-121.94 today.
The 2-Yr yield is up 2bps at 2.125%, 5-Yr is up 1.8bps at 2.64%, 10-Yr is up 1.9bps at 3.378%, and 30-Yr is up 2bps at 4.31%.

PERIPHERY
Spread of 10-Yr Italian BTPs vs Bunds is up 0.9bps at 79.8bps
Spread of 10-Yr Spanish bonds vs Bunds is is up 0.7bps at 52.7bps
Spread of 10-Yr Portuguese PGBs vs Bunds is is up 0.7bps at 38bps

MNI FOREX: USD Recovers After Soft Start as Trump Sees China Tariffs Not Sustainable

• After a soft start to the session for risk appetite, calming words from the US President helped shore up global equities, put a floor under the USD and aide a recovery for the likes of the AUD and NZD. In an interview with Fox News, Trump stated that 100% tariffs on top of what is in place already is "not sustainable", while adding that "We have to have a fair deal" with China.
• The resulting recovery for equities helped tip futures markets in the US back into positive territory at the close, meaning the e-mini S&P should avoid a formal close below the 50-dma support at 6624.3.
• USDJPY's daily low at 149.38 is holding for now. The bounce off lows for the USD Index seemed to coincide with a bout of sales in EM currencies; most notably
  the CNH, ZAR and MXN. In sympathy with JPY gains, CHF stands out: EURCHF's low print of 0.9219 is through the April low, with horizontal support expected layered between 0.9206-22.
• Earnings releases really pickup next week, and particular focus may be paid to the earnings report from Zions Bancorp, who release just after the Monday close. The company's stock traded higher Friday after disclosures about loan portfolio losses Thursday - helping stem the downside in US equities ahead of the Friday close.
• Prospects of an end to the US government shutdown next week still appear slim - although it is clear pressure is beginning to build on the White House to reach a resolution: White House econ adviser Hassett noted that if the shutdown proceeds after the weekend, markets can expect Trump to begin ramping up actions toward a resolution.

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
20/10/2025	0600/0800	**	DE	PPI
20/10/2025	0800/1000	**	EU	EZ Current Account
20/10/2025	0800/1000		EU	ECB Schnabel at Macroeconomics and Finance Conference
20/10/2025	0900/1100	**	EU	EZ Construction Output
20/10/2025	0900/1100	***	EU	EZ GDP 4th (Final)
20/10/2025	1230/0830	*	CA	Industrial Product and Raw Material Price Index
20/10/2025	1400/1600		EU	ECB Schnabel Panel at Macroeconomics and Finance Conference
20/10/2025	1430/1030	**	CA	BOC Business Outlook Survey
20/10/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
20/10/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill