MNI ASIA OPEN: Fed Gov Waller Still Sees Rate Cuts

EXECUTIVE SUMMARY

• MNI TARIFFS: Trump Says Pharma Tariffs "Not Too Distant Future" Suggests Likely 25%
• MNI FED: Gov Waller: Cuts Still Expected, Timing And Magnitude Depends On Tariffs
• MNI US TSYS: Sentiment Gradually Improves on Possible Auto Tariffs
• MNI US DATA: NY Fed Consumer Survey: Longer-Term Inflation Expectations Stay Anchored

US 

MNI FED: Gov Waller: Cuts Still Expected, Timing And Magnitude Depends On Tariffs

Fed Gov Waller in a speech (link) titled "A Tale of Two Outlooks" lays out two different scenarios for rate cuts depending on how tariff policy develops. So while he's clearly maintaining his easing bias, as one of the most dovish FOMC members, he delineates the two easing scenarios as "good news/lower tariff" and "bad news/large tariff" rate cuts: 

• He cites estimates of an effective tariff rate of 25% today, vs under 3% at end-2024, "a sharp increase to a level that the United States has not experienced for at least a century". He posits two scenarios for the economy and Fed rates under these new tariff rates: "One possibility is that they will remain very high and be long-lasting, near the current average of 25 percent or more, as part of a committed effort by the Administration to engineer a fundamental shift in the U.S. economy toward producing more goods domestically and reducing trade deficits. The second scenario is that the suspensions are the beginning of a concerted effort to negotiate reductions in foreign barriers faced by U.S. exporters that will result in the removal of most of the announced import tariffs, which would reduce the average tariff rate to around 10 percent. This latter scenario had been my base case up until March 1."

NEWS

MNI TARIFFS: Trump Says Pharma Tariffs "Not Too Distant Future" Suggests Likely 25%

US President Donald Trump has delivered a wide-ranging press conference alongside Salvadoran President Nayib Bukele at the White House. On tariffs, Trump indicates that tariffs on pharmaceuticals will be coming shortly as the US needs to reshore pharma production. He namechecks Ireland as a pharma producer and says: “All I have to do is impose a tariff… The higher the tariff, the faster they come,” referring to companies relocating their manufacturing to the US.

• He says, “its going to be like we have on cars… We have, as you know, a 25% tariff on cars [steel and aluminum],” adding “that category fits right now [for pharma].” Asked about his timeline for implementation, he says: “not too distant future”. Trump declines to offer any information on potential semiconductor tariffs. When asked to clarify comments yesterday when he suggested a Russian attack on the Ukrainian city of Sumy was a “mistake”, Trump reiterates that the mistake was on the behalf of Ukrainian President Volodymyr Zelenskyy and former President Joe Biden for allowing the war to start.

MNI US: Committee Chairs To Begin Work On Reconciliation Package During Recess

House Speaker Mike Johnson (R-LA) and Senate Majority Leader John Thune (R-SD) have tasked their committee chairs with using the two-week Congressional recess, which is underway now, to start bridging internal differences over items to be included in the mammoth Republican reconciliation package. House Republicans intend to begin marking up their version of the bill as soon as Congress returns to Washington. Note: Tax bills must start in the House of Representatives.

MNI FED: Deutsche See An Additional 2 Cuts In 2025-26 On Growth Slowdown

Deutsche Bank analysts have added Fed cuts to their expected path, as "record levels of policy uncertainty and the sharp tightening of financial conditions has already set the US economy on a weaker growth trajectory." The upshot is that they now see a 25bp cut in December 2025, with 2 more cuts in Q1 2026 (ie 3x consecutive cuts through Jan and Mar 2026) before holding. That would get the Funds rate to Deutsche's view of neutral (3.50-3.75%). Previously they hadn't seen any cuts in 2025, and just one 25bp cut in 2026 (Q3).

MNI CANADA: Debate Week Underway Ahead Of 28 Apr Election

PM Mark Carney's centre-left Liberal party remains in a strong position to win an outright majority in the House of Commons according to the latest opinion polling and political betting markets. Only a single poll over the past week, from Mainstreet Research on 13 April, has shown the centre-right Conservatives leading. Even then, if the 44-42% split in the Conservatives' favour was repeated in a federal election, it would likely not prove sufficient for Pierre Poilievre's party to win an overall majority given the Canadian first-past-the-post electoral system. 

MNI US TSYS: Sentiment Gradually Improves on Possible Auto Tariffs

• Treasuries looked to finish near late Monday highs (TYM5 +30.5 at 110-22, yield -.1176 to 4.3720%), stocks firmer despite ongoing tariff uncertainty. Information Technology sector shares still lead gainers in late trade despite ongoing tariff uncertainty after Trump denied that US officials said smartphones, computers, and other consumer electronics were excluded from tariffs over the weekend.
• "There was no tariff exception" announcement Trump said, while officials are "looking at chips, whole electronics supply chain; chips to be assessed in national Security tariff probes." Nevertheless, "markets very strong once they got used to tariffs" Trump posted Monday.
• Sentiment improved after midday on a couple items: Pres Trump said he was "exploring possible exemptions to his tariffs on imported vehicles and parts" while Fed Gov Waller called for "flexible" monetary policy while also maintaining his view that the inflationary effects of tariffs are likely to be temporary.
• Initial greenback weakness was exacerbated by a more optimistic tone for risk sentiment, assisted by the tariff reprieves for key tech products (released late on Friday). This allowed the USD index to edge back towards Friday’s cycle low of 99.01. 5-year treasury yields are 14bps lower on the session, providing an additional dollar headwind.
• Looking forward to Tuesday's data calendar: Empire Manufacturing and Import/Export Price Index data at 0830ET followed by US Tsy $48B 52W & $70B 6W bill sales at 1130ET.

OVERNIGHT DATA

MNI US DATA: NY Fed Consumer Survey: Longer-Term Inflation Expectations Stay Anchored

The NY Fed's Survey of Consumer Expectations showed a notable pickup in short-term inflation expectations in March - but importantly, also offered evidence that longer-term expectations remained well-anchored.

• The 1-year median expectation of 3.26% was above analysts' consensus (3.26%), marking an 18-month high and a sharp rise from 3.13% prior. But the 3Y of 3.0% was unchanged from prior and basically steady for 4 consecutive months, and the 5Y median actually ticked lower to 2.9% from 3.0% prior.
• The latter two will be very closely eyed by the Fed as it weighs whether longer-run inflation expectations are becoming de-anchored amid the ongoing tariff shock, and the answer so far is "no".
• While some FOMC members have expressed concern at the longer-run UMichigan survey numbers (4.4% in April was the highest since the early 1990s), Chair Powell has recently expressed skepticism of that metric. The NY Fed survey is seen as having a more robust methodology and we would expect the Fed to take greater signal from it.
• Another notable finding in the survey was that there is no apparent increase in consumers' inflation uncertainty despite tariffs: "Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased at one- and five-year-ahead horizons and was unchanged at the three-year-ahead horizon."

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 443.53 points (1.1%) at 40657.1
S&P E-Mini Future up 72.5 points (1.34%) at 5463.75
Nasdaq up 198.7 points (1.2%) at 16922.9
US 10-Yr yield is down 12 bps at 4.37%
US Jun 10-Yr futures are up 31/32 at 110-22.5
EURUSD up 0.0012 (0.11%) at 1.1367
USDJPY down 0.62 (-0.43%) at 142.92
WTI Crude Oil (front-month) up $0.11 (0.18%) at $61.61
Gold is down $26.25 (-0.81%) at $3211.12

European bourses closing levels:
EuroStoxx 50 up 124.16 points (2.59%) at 4911.39
FTSE 100 up 170.16 points (2.14%) at 8134.34
German DAX up 580.73 points (2.85%) at 20954.83
French CAC 40 up 168.32 points (2.37%) at 7273.12

US TREASURY FUTURES CLOSE

3M10Y -9.829, 5.56 (L: 3.875 / H: 14.194)
2Y10Y -0.039, 52.292 (L: 47.945 / H: 55.803)
2Y30Y +4.475, 94.982 (L: 87.797 / H: 98.837)
5Y30Y +7.974, 78.673 (L: 70.959 / H: 80.329)
Current futures levels:
Jun 2-Yr futures up 6.875/32 at 103-22.625 (L: 103-12.125 / H: 103-23.75)
Jun 5-Yr futures up 20.25/32 at 108-1.25 (L: 107-05.5 / H: 108-03.75)
Jun 10-Yr futures up 31/32 at 110-22.5 (L: 109-13 / H: 110-25)
Jun 30-Yr futures up 1-08/32 at 114-14 (L: 112-16 / H: 114-18)
Jun Ultra futures up 1-11/32 at 118-24 (L: 116-09 / H: 118-28)

MNI US 10YR FUTURE TECHS: (M5) Maintains A Bearish Tone

• RES 4: 114-10   High Apr 7 and the bull trigger 
• RES 3: 113-00   Round number support
• RES 2: 112-08   High Apr 8  
• RES 1: 111-01+/111-20 20-day EMA / High Apr 9
• PRICE:‌‌ 110-19 @ 1355 ET Apr 14
• SUP 1: 109-08   Low Apr 11
• 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 maintain a softer tone following last week’s reversal lower. Price has traded through an important support - a trendline at 110-01+, drawn from the Jan 13 low. A clear break of this line would strengthen a bearish threat and signal scope for a deeper retracement. This would open 108-26+, a Fibonacci retracement. On the upside, initial resistance to watch is 111-01+, the 20-day EMA.

SOFR FUTURES CLOSE

Jun 25 -0.010 at 95.930
Sep 25 +0.050 at 96.280
Dec 25 +0.085 at 96.505
Mar 26 +0.110 at 96.640
Red Pack (Jun 26-Mar 27) +0.125 to +0.145
Green Pack (Jun 27-Mar 28) +0.145 to +0.145
Blue Pack (Jun 28-Mar 29) +0.125 to +0.140
Gold Pack (Jun 29-Mar 30) +0.110 to +0.120

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

• 1M -0.00093 to 4.32093 (+0.00202 total last wk)
• 3M +0.00444 to 4.26054 (-0.00288 total last wk)
• 6M +0.01528 to 4.11328 (-0.02752 total last wk)
• 12M +0.03749 to 3.88879 (-0.01193 total last wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.33% (-0.04), volume: $2.584T
• Broad General Collateral Rate (BGCR): 4.32% (-0.04), volume: $1.046T
• Tri-Party General Collateral Rate (TCR): 4.32% (-0.04), volume: $1.007T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $105B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $275B

FED Reverse Repo Operation

RRP usage rebounds to $102.838B this afternoon from $98.531B 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 34.

MNI PIPELINE: Corporate Bond Update: $6B JPM 2Pt & $2.5B BNYM 3Pt Launched

$18.1B Debt to Price Monday

• Date $MM Issuer (Priced *, Launch #)
• 04/14 $8B #Morgan Stanley $2B 4NC3 +113, $500M 4NC3 SOFR+138, $2.5B 6NC5 +118, $3B 11NC10 +128
• 04/14 $6B #JP Morgan $2.5B 6NC5 +110, $3.5B 11NC10 +120
• 04/14 $2.5B #BNY Mellon $750M 2NC1 +75, $500M 2NC1 SOFR+71, $1.25B 4NC3 +87
• 04/14 $1B #HP Inc $500M 5Y +145, $500M 10Y +175
• 04/14 $600M #Trans-Allegheny Interstate Line +5Y +100

MNI BONDS: EGBs-GILTS CASH CLOSE: BTPs, Gilts Outperform

European bonds strengthened across the board to start the week, with Gilts outperforming Bunds.

• Price action was indicative of a relief rally, with mixed messages over the weekend on sectoral US tariff exemptions seen as a moderate positive development.
• That helped Treasuries stabilize from their recent sell-off, spilling over into the European space.
• A stabilization in US consumer's long-term inflation expectations evident in a New York Fed survey helped trigger another leg of gains, with Bund / Gilt futures finding new session highs into the cash close.
• The UK curve bull flattened substantially, with Germany leaning likewise.
• BTPs outperformed on the EGB periphery, benefiting from Friday's S&P ratings upgrade to BBB+ (stable) from BBB.
• Focus for the week remains on UK Feb/Mar Labour Market *Tuesday) and Mar Inflation (Wednesday) data, and the ECB meeting Thursday.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 3bps at 1.759%, 5-Yr is down 5.8bps at 2.074%, 10-Yr is down 5.8bps at 2.512%, and 30-Yr is down 1.4bps at 2.877%.
• UK: The 2-Yr yield is down 3bps at 4.018%, 5-Yr is down 5.7bps at 4.153%, 10-Yr is down 9.3bps at 4.66%, and 30-Yr is down 13.2bps at 5.384%.
• Italian BTP spread down 7.7bps at 116.5bps / French OAT down 4.6bps at 75.4bps  

MNI FOREX: EURGBP Slides 1% Ahead of UK Labour Market Figures

• In a similar, albeit less volatile session to Friday, there dollar has seen significant two way price swings, culminating in broad dollar indices ticking lower on the day. Initial greenback weakness was exacerbated by a more optimistic tone for risk sentiment, assisted by the tariff reprieves for key tech products (released late on Friday). This allowed the USD index to edge back towards Friday’s cycle low of 99.01. 5-year treasury yields are 14bps lower on the session, providing an additional dollar headwind.
• However, the USD did find a base as the more constructive tone in equity markets soured through the US session. Price action was best exemplified by USDJPY, which had a punchy 207 pip range. After gapping higher at the open to levels around 144.30, USDJPY then steadily sold off, seeing the pair reach as low as 142.24 before stabilising. Despite the impressive moves for US yields on the day, the pair holds closer to 143.00 as we approach the APAC crossover.
• The best performers in G10 are NZD, GBP and NOK. NZDUSD has risen just shy of 1% Monday, and the recovery seems to have boosted by further short covering above 0.5850. Spot has returned to levels last seen in December, just below the 0.5900 mark.
• Overall, with reciprocal tariffs delayed, GBP is rallying well - underscoring GBP's correlation with risk - which looks through only marginal tweaks to monetary policy pricing. Technically, moving average studies remain in a bull mode position that highlights a dominant uptrend. An extension higher would open key resistance and the bull trigger is 1.3207, the Apr 3 high. Single currency weakness has seen EURGBP move 1% lower on Monday to 0.8600.
• For EURUSD, spot had another brief flurry above 1.14 to a 1.1425 high in early trade. However, the greenback stabilisation prompted a solid turnaround for the pair, which now sits closer to 1.1330 as markets have one eye on the ECB meeting this Thursday.
• RBA minutes, UK labour market figures and German ZEW are all scheduled on Tuesday, ahead of Canadian CPI and US Empire State Manufacturing, which highlight the North American session.

TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
15/04/2025	0600/0700	***	GB	Labour Market Survey
15/04/2025	0645/0845	***	FR	HICP (f)
15/04/2025	0800/1000	**	EU	ECB Bank Lending Survey
15/04/2025	0900/1100	**	EU	Industrial Production
15/04/2025	0900/1100	***	DE	ZEW Current Expectations Index
15/04/2025	0900/1000	**	GB	Gilt Outright Auction Result
15/04/2025	1215/0815	**	CA	CMHC Housing Starts
15/04/2025	1230/0830	***	CA	CPI
15/04/2025	1230/0830	**	CA	Monthly Survey of Manufacturing
15/04/2025	1230/0830	**	US	Import/Export Price Index
15/04/2025	1230/0830	**	US	Empire State Manufacturing Survey
15/04/2025	1255/0855	**	US	Redbook Retail Sales Index
15/04/2025	1300/0900	*	CA	CREA Existing Home Sales
15/04/2025	1530/1130	**	US	US Treasury Auction Result for 52 Week Bill
15/04/2025	2310/1910		US	Fed Governor Lisa Cook
16/04/2025	2350/0850	*	JP	Machinery orders
16/04/2025	0200/1000	***	CN	Fixed-Asset Investment
16/04/2025	0200/1000	***	CN	Retail Sales
16/04/2025	0200/1000	***	CN	Industrial Output
16/04/2025	0200/1000	***	CN	GDP
16/04/2025	0200/1000	**	CN	Surveyed Unemployment Rate M/M