MNI ASIA OPEN: Fed Gov Cook Sees Risk Two Sided, Cuts Cool Off

EXECUTIVE SUMMARY

• MNI: Fed's Cook - Policy Well Placed To Face Two-Sided Risks
• MNI FED: Atlanta's Bostic Sticks To 1 Cut View For 2025, "Ways To Go" On Inflation
• MNI US DATA: Manufacturing Orders Give Back Prior Gains In April, Outlook Subdued
• MNI US: Conservative Senators Sound Alarm Over Debt Limit Hike In Big Beautiful Bill
• MNI US DATA: April JOLTS Report More Of The Same Rather Than Sharper Deterioration

US

MNI FED: Atlanta's Bostic Sticks To 1 Cut View For 2025, "Ways To Go" On Inflation

Atlanta Fed President Bostic on Tuesday reiterated his view expressed in the March Dot Plot that he expects one rate cut later this year - "I don’t have any reason to think that my outlook is going to change radically... a lot of it will depend on how the uncertainty resolves itself. I’m going to stay diligent and take things on as they happen."

• That said, tariffs could boost inflation in the near-term - with the persistence vs one-off impact of tariffs still an open debate - and in any case overall PCE remains above target so "there's still a ways to go in terms of the progress we're going to need to see". He noted local business contacts may be putting off price increases until later in the summer.

MNI: Fed's Cook - Policy Well Placed To Face Two-Sided Risks

The U.S. economy faces heightened risks of both higher inflation and a weaker job market, and the current level of interest rates leaves the Federal Reserve in a good place to respond if either threat materializes, Fed Governor Lisa Cook said Tuesday. 

• "The current stance of monetary policy is well positioned to respond to a range of potential developments," Cook said in prepared remarks to the Council on Foreign Relations. "As I consider the appropriate path of monetary policy, I will carefully consider how to balance our dual mandate, and I will take into account the fact that price stability is essential for achieving long periods of strong labor market conditions."

NEWS

MNI US: Conservative Senators Sound Alarm Over Debt Limit Hike In Big Beautiful Bill

Republican fiscal hawks in the Senate continue to voice concerns over raising the debt limit in the Republican tax and spending megabill. Senator Rand Paul (R-KY) is likely a hard no on any package that raises the debt limit, telling CNBC this morning: “I’m just not for that. That’s not conservative.”

MNI US: Senate GOP Conference To Meet Weds To Discuss Accelerated Megabill Schedule

Laura Weiss at Punchbowl News reports on X that Senate Republicans will hold an all-conference meeting to discuss the 'One Big Beautiful' reconciliation bill on Wednesday afternoon. Come as GOP leadership and President Donald Trump try to nudge wavering Senators to back the package on an accelerated timeline to get the final bill to Trump desk by July 4.

MNI UK: Sky News-Gov't Could Be Forced Into Raising Def Spend Target To Avoid US Ire

Sky News reports that "The UK will be forced to agree this month to increase defence spending to 3.5% of national income within a decade as part of a NATO push to rearm and keep the US on side." This comes just a day after PM Sir Keir Starmer's gov't outlined its Strategic Defence Review, which committed to an increase to 3% of GDP by 2034. 

MNI UKRAINE: Kerch Bridge Attack Latest Setback For Moscow

Just days after an audacious drone attack on Russia's long-range strategic bomber fleet, Ukrainian special forces have claimed responsibility for another major strike, this time hitting the Kerch Bridge that joins occupied Crimea to mainland Russia. This marks the third time that the bridge, a key military and civilian link between Crimea and Russia and viewed as President Vladimir Putin's "pride and joy", has been hit by Ukrainian forces since the start of Russia's full-scale invasion in 2022. 

MNI NETHERLANDS: PM Confirms Resignation Of Cabinet Setting Stage For Snap Election

After a two-hour cabinet meeting Prime Minister Dick Schoof has confirmed that he will travel to the Huis ten Bosch in The Hague to offer the resignation of the cabinet to King Willem-Alexander. This follows the collapse of the four-party governing coalition earlier on 3 June. The right-wing nationalist Party for Freedom (PVV) withdrew from gov't after party leader Geert Wilders failed to get his coalition partners to agree to a new 10-point asylum program.

Bloomberg: Trump to Sign Order Hiking Steel, Aluminum Tariffs to 50%
President Donald Trump will sign a directive on Tuesday formally raising steel and aluminum tariffs to 50% from 25%, White House Press Secretary Karoline Leavitt announced.

MNI US TSYS: Yields Rise as JOLTS Job Openings Jump, Rate Cut Pricing Cools

• Treasuries look to finish steady (10s) to mixed Tuesday, well off early session highs after higher than expected JOLTS job openings and up-revision to prior openings.
• The JOLTS report for April was on balance one of relative stability in another look at early reaction to Trump administration policies. Job openings surprisingly increased (7391k (sa, cons 7100k) in April after a marginal upward revised 7200k (initial 7192k) in March) whilst the hire rate pushed to its highest since September although the quits rate pushed back lower again after what to us was a surprising uptick back in March.
• Reminder, ADP private employ data schedule for 0815ET tomorrow, not to mention May employment report thjis Friday at 0830ET.
• Stocks pared gains late. S&P eminis off May 29 highs after the WH announced Pres Trump will sign 50% steel & aluminum import tariffs Wednesday. Unfounded Trump-Xi Friday call rumor had buoyed stocks briefly.
• Atlanta Fed President Bostic on Tuesday reiterated his view expressed in the March Dot Plot that he expects one rate cut later this year. Meanwhile, Fed Governor Lisa Cook said the U.S. economy faces heightened risks of both higher inflation and a weaker job market, and the current level of interest rates leaves the Federal Reserve in a good place to respond if either threat materializes.

OVERNIGHT DATA

MNI US DATA: April JOLTS Report More Of The Same Rather Than Sharper Deterioration

The JOLTS report for April was on balance one of relative stability in another look at early reaction to Trump administration policies. Job openings surprisingly increased whilst the hire rate pushed to its highest since September although the quits rate pushed back lower again after what to us was a surprising uptick back in March. Of course, this is only for April in a fast-moving environment. 

• Job openings: 7391k (sa, cons 7100k) in April after a marginal upward revised 7200k (initial 7192k) in March.
• The ratio of vacancies to unemployed inched up from 1.02 to 1.03. The 1.02 was technically the lowest since Apr 2021. For context it has been in a relatively narrow range of 1.02-1.13 with an average 1.07 since Jun 2024) and averaged 1.2 in 2019 and 1.0 in 2017-18.
• The quits rate meanwhile dropped to 2.00% after what to us was a surprise increase back in March to 2.10%, for its lowest since Dec 2024. This rate is still above the 1.91 in November but remains significantly below the 2.3% in 2019 and 2.2% in 2017-18 in a sign of a cooling labor market.
• There’s a similar trend specifically for the private sector, at 2.22% after 2.33%, whilst government quit rates remain historically low at 0.8% overall and 0.5% specifically for federal employees.

MNI US DATA: Manufacturing Orders Give Back Prior Gains In April, Outlook Subdued

Factory orders came in weaker than expected in April, with the 3.7% M/M contraction exceeding the 3.2% drop expected by consensus. Ex-transport orders told the same story: -0.5% in April (+0.2% expected), failing to improve from March's -0.5%. This marked the biggest monthly pullback in manufacturing orders in 15 months, and more than reversed March's rise to put manufacturing orders only slightly higher than in sequential. Clearly, there was some pulling-forward of orders in March, ahead of anticipated tariff impacts.

• The strong Feb-March performance kept momentum strong on a 3M/3M annualized rate basis though, at 7.6%, remaining around the strongest levels since mid-2022 - however at April's pace, this is unlikely to persist (and core durables orders are pointing to a slowdown).
• Total factory orders consist of nondurable and durable goods orders, each of which were roughly equal in dollar value in April - nondurable goods orders fell 0.9% M/M, a marking a second consecutive month of sharp contraction (-0.7%).
• Durable goods orders (-6.3%, after +7.6%) were basically unchanged in the final from the preliminary readings, though core capital goods orders (nondefense, ex-aircraft) were adjusted slightly lower to -1.5% (was -1.3%).

MNI US DATA: Redbook, CARTS Point To Solid May Retail Sales Growth

The latest Redbook Retail Sales Index showed 4.9% Y/Y growth in the last week of May (to May 31), a slowdown from 6.1% the prior week but still keeping total monthly sales at 5.5% Y/Y (vs retailers' 5.4% targeted gain). This is the first Redbook report in a while to refer to tariffs, and it earns a mention on the inflationary side: "Due to tariffs, some retailers have selectively increased prices on their products. A few retailers have lowered their profit outlooks and withdrawn their full-year guidance." 

• Redbook also notes looking forward that "seasonal demand is expected to drive business through June", with a preliminary growth target of 5.2%, though "it is likely to moderate in July, which is a transitional month leading up to the fall restocking and back-to-school periods".
• Separately, the Chicago Fed's CARTS estimate of retail sales ex-autos growth in May is 0.4% M/M SA (vs 0.10% in the "official" series for April).
• While both of these series are in nominal terms (which is no different from the official Census Bureau series), there is no evidence in the data to suggest a slowdown in national retail sales in May. Indeed the CARTS report points to a 0.4% inflation-adjusted rise in retail sales ex-autos.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 211.15 points (0.5%) at 42515.86
S&P E-Mini Future up 33.5 points (0.56%) at 5980.5
Nasdaq up 166.9 points (0.9%) at 19409.37
US 10-Yr yield is up 1.8 bps at 4.4577%
US Sep 10-Yr futures are down 1/32 at 110-14
EURUSD down 0.0068 (-0.59%) at 1.1373
USDJPY up 1.28 (0.9%) at 144
WTI Crude Oil (front-month) up $0.95 (1.52%) at $63.47
Gold is down $27.71 (-0.82%) at $3353.94

European bourses closing levels:
EuroStoxx 50 up 20.14 points (0.38%) at 5375.7
FTSE 100 up 12.76 points (0.15%) at 8787.02
German DAX up 160.95 points (0.67%) at 24091.62
French CAC 40 up 26.64 points (0.34%) at 7763.84

US TREASURY FUTURES CLOSE

3M10Y +3.029, 12.726 (L: 5.773 / H: 14.114)
2Y10Y -0.281, 49.839 (L: 47.516 / H: 51.11)
2Y30Y -0.41, 102.276 (L: 99.485 / H: 104.032)
5Y30Y -0.609, 95.251 (L: 93.927 / H: 96.961)
Current futures levels:
Sep 2-Yr futures down 1.125/32 at 103-19.75 (L: 103-18.875 / H: 103-22.75)
Sep 5-Yr futures down 1.75/32 at 107-30.75 (L: 107-29.25 / H: 108-07)
Sep 10-Yr futures down 1/32 at 110-14 (L: 110-11 / H: 110-26.5)
Sep 30-Yr futures up 5/32 at 112-3 (L: 111-28 / H: 112-26)
Sep Ultra futures up 7/32 at 115-2 (L: 114-26 / H: 116-00)

MNI US 10YR FUTURE TECHS: (U5) Monitoring Resistance

• RES 4: 112-04+ High May 2
• RES 3: 111-25   High May 7
• RES 2: 111-05+ High May 9
• RES 1: 110-30   High May 30 and high Jun 2
• PRICE:‌‌ 110-18 @ 1100 ET Jun 3
• SUP 1: 109-26/12+ Low May 29 / 22 and the bear trigger
• SUP 2: 109-09+ Low Apr 11 and key support
• SUP 3: 109-00   Round number support
• SUP 4: 108-25+ 0.764 proj of the Apr 7 - 11 - May 1 price swing

Treasury futures are holding on to recent gains. A bear cycle remains in play for now, and recent short-term gains still appear corrective. However, the contract has breached an important resistance at 110-23, the May 16 high. A clear break of this level would undermine a bearish theme and highlight a stronger reversal, exposing 111-05+, the May 9 high. On the downside, a resumption of weakness would refocus attention on 109-12+, May 22 low.

SOFR FUTURES CLOSE

Jun 25 +0.003 at 95.690
Sep 25 steady00 at 95.905
Dec 25 -0.015 at 96.155
Mar 26 -0.030 at 96.365
Red Pack (Jun 26-Mar 27) -0.035 to -0.02
Green Pack (Jun 27-Mar 28) -0.02 to -0.015
Blue Pack (Jun 28-Mar 29) -0.01 to -0.005
Gold Pack (Jun 29-Mar 30) steadysteady0 to +0.010

REFERENCE RATES (PRIOR SESSION)

MNI US TSYS/OVERNIGHT REPO: SOFR Remains Elevated Amid Coupon Settlement Impact

Secured rates remained slightly elevated Monday with SOFR at 4.35%, unchanged from Friday's month-end figure. 

• Large Treasury net cash raising (via coupon auction settlements of a net $94.5B) will have kept rates underpinned (indeed even a slight uptick in rates may well have been expected), though BGCR and TGCR dipped 2bp apiece.
• Tuesday (today) should see rates subside, both with month-end out of the way and $24B in Treasury bill paydowns.

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.35%, no change, $2771B
* Broad General Collateral Rate (BGCR): 4.32%, -0.02%, $1080B
* Tri-Party General Collateral Rate (TGCR): 4.32%, -0.02%, $1046B

New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume:  $113B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume:  $271B 

​​FED Reverse Repo Operation

RRP usage rebounds to $153.177B this afternoon from $135.841B yesterday, total number of counterparties at 34. Usage had fallen to $54.772B on 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 Update: $16.2B Debt Issued Tuesday

• Date $MM Issuer (Priced *, Launch #)
• 06/03 $3B *AfDB: $2B WNG 3Y SOFR+33, $1B WNG 10Y SOFR+64
• 06/03 $2.25B #NAB $750M 3Y +40, $750M 3Y SOFR+65, $750M 5Y +52
• 06/03 $2B #Bank of NY Mellon $750N 3NC2 +48, $500M 3NC2 SOFR+68, $750M 11NC10 +85
• 06/03 $2B *Prov. of Ontario: 10Y SOFR+95
• 06/03 $1.5B *CPPIB 5Y SOFR+54
• 06/03 $1.5B #GE Healthcare $650M +5Y +78, $850M 10Y +103
• 06/03 $1.25B *Kommuninvest +3Y SOFR+39
• 06/03 $1B *Hong Kong 5Y Green +50
• 06/03 $700M #Corebridge Global 5Y +85
• 06/03 $500M IADB 2030 tap SOFR+40
• 06/03 $500M *Autodesk WNG 10Y +87

MNI BONDS: EGBs-GILTS CASH CLOSE: Late Selloff Obscures Constructive Session

Core EGB / Gilt yields erased much of their early drop late in the session Tuesday.

• An early bid stemmed in part from a strong 10Y JGB auction overnight (recall, weak long-end Japan dynamics had weighed in previous sessions), with Dutch inflation likewise on the weak side bringing down Eurozone-wide HICP, and some pointing to the OECD's global growth forecast cuts / collapse of the Netherlands Government as supportive.
• Global FI softened throughout the rest of the day, with rising equities and oil, and EUR supply weighing.
• After looking to finish with decent gains, Bunds and Gilts sold off in the minutes before the European cash close  with no clear catalyst, some identifying an (apparent) rumour that US Pres Trump was scheduled to call China's Xi on Friday.
• The German curve twist steepened, with the UK's bull flattening. One takeaway from the BOE's TSC hearing was that Deputy Gov Breeden positioned herself as a little more dovish than Gov Bailey.
• Periphery / semi-core EGB spreads closed mixed, with 10Y BTPs at the tightest closing levels to Bunds since April 2021.
• Wednesday brings final Services PMIs. The ECB decision Thursday is the week's main event - MNI's preview is here. Along with the expected 25bp cut, focus will be on any clues around the willingness or lack thereof to highlight a potential pause in July.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.3bps at 1.786%, 5-Yr is down 0.1bps at 2.082%, 10-Yr is up 0.1bps at 2.525%, and 30-Yr is up 0.5bps at 3.017%.
• UK: The 2-Yr yield is down 0.1bps at 4.028%, 5-Yr is down 2bps at 4.143%, 10-Yr is down 2.9bps at 4.638%, and 30-Yr is down 4.3bps at 5.367%.
• Italian BTP spread down 0.6bps at 97bps / French OAT up 0.6bps at 67bps   

MNI FOREX: USD Bounces Back, US Data & Firmer Equities Provide Additional Tailwinds

• The USD underwent a mild corrective bounce early Tuesday, reversing a small part of the Monday underperformance as catalysts for a further phase of USD weakness dried up somewhat. Firmer US data and a constructive tone for major equity benchmarks then provided additional tailwinds for the greenback, leaving the USD index roughly 0.5% higher as we approach the APAC crossover.
• US JOLTS job openings came in above expectations, and despite the data potentially providing a stale view of the US labour market, the data spurred a more protracted intra-day recovery for the dollar. This prompted the likes of USDJPY(+0.88%) to extend its bounce to over 1% from session lows, and close back in on the 144 handle. In similar vein, USDCHF has rallied back to 0.8240 up 0.77% on the session. While the Swiss CPI data was in line with expectations, it did confirm that annual inflation slipped below the central bank’s target range at -0.1% Y/y.
• The Euro has traded on the backfoot as below expectation Eurozone inflation data may also be weighing on the single currency ahead of this week’s ECB meeting. The ECB’s June macroeconomic projections will be key in shaping the initial market reaction to Thursday’s policy statement, given a 25bp rate reduction is unanimously expected.
• EURUSD has spent the US session consolidating back below the 1.14 mark. In terms of support, the 20-day EMA provides short-term significance on a closing basis and currently intersects at 1.1316.
• After being among the best performing currencies on Monday, the likes of AUD and NZD have given up a solid portion of those advances today, as the relief rally for the greenback extends, and weighs on antipodean FX. For AUDUSD, that’s another test/rejection of the 0.6500 handle, a level spot has been unable to close above this year despite several tests of the psychological mark.
• Australian GDP highlights Wednesday’s APAC calendar, before the Bank of Canada decision later in the session. US ADP and ISM Services PMI are other notable data points.

MNI FX OPTIONS: Expiries for Jun04 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1200(E1.5bln), $1.1250(E885mln), $1.1350-55(E1.2bln), $1.1400-05(E1.1bln), $1.1450(E1.3bln)
• USD/JPY: Y143.50($698mln), Y144.15-25($580mln), Y145.00($630mln)
• AUD/USD: $0.6435-55(A$1.7bln)
• USD/CAD: C$1.3600($560mln), C$1.3735-50($1.4bln), C$1.3800($621mln)

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
04/06/2025	0700/0900	**	ES	Industrial Production
04/06/2025	0715/0915	**	ES	S&P Global Services PMI (f)
04/06/2025	0715/0915	**	ES	S&P Global Composite PMI (final)
04/06/2025	0745/0945	**	IT	S&P Global Services PMI (f)
04/06/2025	0745/0945	**	IT	S&P Global Composite PMI (final)
04/06/2025	0750/0950	**	FR	S&P Global Services PMI (f)
04/06/2025	0750/0950	**	FR	S&P Global Composite PMI (final)
04/06/2025	0755/0955	**	DE	S&P Global Services PMI (f)
04/06/2025	0755/0955	**	DE	S&P Global Composite PMI (final)
04/06/2025	0800/1000	**	EU	S&P Global Services PMI (f)
04/06/2025	0800/1000	**	EU	S&P Global Composite PMI (final)
04/06/2025	0830/0930	**	GB	S&P Global Services PMI (Final)
04/06/2025	0830/0930	***	GB	S&P Global/ CIPS UK Final Composite PMI
04/06/2025	0900/1000	**	GB	Gilt Outright Auction Result
04/06/2025	0900/1000	**	GB	Gilt Outright Auction Result
04/06/2025	1100/0700	**	US	MBA Weekly Applications Index
04/06/2025	1215/0815	***	US	ADP Employment Report
04/06/2025	1230/0830		US	Atlanta Fed's Raphael Bostic
04/06/2025	1345/0945	***	CA	Bank of Canada Policy Decision
04/06/2025	1345/0945	***	US	S&P Global Services Index (final)
04/06/2025	1345/0945	***	US	S&P Global US Final Composite PMI
04/06/2025	1400/1000	***	US	ISM Non-Manufacturing Index
04/06/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
04/06/2025	1430/1030		CA	BOC press conference
04/06/2025	1800/1400		US	Fed Beige Book
05/06/2025	-		EU	European Central Bank Meeting
05/06/2025	2330/0830	**	JP	average wages (p)
05/06/2025	0130/1130	**	AU	Trade Balance
05/06/2025	0145/0945	**	CN	S&P Global Final China Services PMI
05/06/2025	0145/0945	**	CN	S&P Global Final China Composite PMI