MNI ASIA OPEN: Fed Holds Steady, Reduce Pace of QT

EXECUTIVE SUMMARY

• MNI FED: FOMC Sticks To Two '25 Cuts, Slows QT Pace
• MNI BRIEF: Powell Says Fed Can Wait For More Policy Clarity
• MNI BRIEF: Powell-QT Trim To Extend Approach To Ample Reserves
• MNI RUSSIA: Kremlin Blames Kyiv For Energy Infra Attacks Ahead Of US-Ukraine Call
• MNI STIR: FOMC Announcement Trims Hawkish Repricing Seen Pre-Decision

US

MNI: FOMC Sticks To Two '25 Cuts, Slows QT Pace

Federal Reserve officials said Wednesday they expect to cut interest rates twice this year, the same as December, as inflation looks more persistent than thought and heightened uncertainty around tariff policies raises worries about an economic slowdown. The central bank also decided to slow the pace at which it is reducing Treasuries holdings in its balance sheet to a cap of USD5 billion per month from USD25 billion previously. Fed Governor Chris Waller dissented against that portion of the decision, preferring to maintain the current pace of asset runoffs. Agency mortgage securities will continue to run off at a maximum of USD35 billion a month. 

MNI BRIEF: Powell Says Fed Can Wait For More Policy Clarity

Federal Reserve Chair Jerome Powell said Wednesday the central bank is well-positioned to sit tight and wait for policy uncertainty to subside before making any decisions on interest rates. "We are well positioned to wait for greater clarity," Powell told reporters during his press conference, citing two-sided risks to the outlook. "Some near-term measures of inflation expectations have recently moved up. We see this in both market and survey based measures and survey responses. Both consumers and businesses are mentioning tariffs as a driving factor," he said. 

MNI BRIEF: Powell-QT Trim To Extend Approach To Ample Reserves

The Federal Reserve slowed the pace of Treasury runoffs from its balance sheet in order to gauge more gradually what might be considered an "ample" level of reserves in the banking system, Fed Chair Jerome Powell said Wednesday. "We came to the view that this was a good time to make the move that we made," he said. "We are going to cut it roughly in half. And the sense of that is, if you are cutting the pace of QT roughly in half, then the runway has probably doubled." 

NEWS

MNI US: Trump's Dismissal Of Democrat FTC Commissioners Delivers More Uncertainty

President Donald Trump yesterday fired the two Democrat members of the Federal Trade Commission - Rebecca Slaughter and Alvaro Bedoya -, a surprise move considering the White House had hinted at some continuity from the Biden administration at the FTC. 

MNI RUSSIA: Kremlin Blames Kyiv For Energy Infra Attacks Ahead Of US-Ukraine Call

Reuters reporting comments from EU High Representative for Foreign Affairs and Security Policy Kaja Kallas, speaking on the phone call between Presidents Donald Trump and Vladimir Putin on 18 March. Kallas says that it is "clear that Russia does not really want to make any kind of concessions", and that "Russia can't be trusted." Claims that "what Russia wants is for Ukraine to let its guard down." Kallas says that southern Europe is part of the 'coalition of the willing' that will militarily help Ukraine. Following Putin's demand that all foreign aid to Kyiv stops, Kallas says that "Ukraine has to be able to defend itself".

MNI TURKEY: Imamoglu Arrest Risks Social Unrest Despite Ban On Protests

The arrest of Istanbul mayor and key opposition figure Ekrem Imamoglu on charges of being a "criminal organisation leader suspect" has roiled domestic and regional financial markets. As has been noted, Imamoglu is seen as the most significant political challenge to President Recep Tayyip Erdogan, with the Istanbul mayor due to have been confirmed as the presidential candidate for the main opposition centre-left Republican People's Party (CHP) on 23 March.

MNI ISRAEL: Foreign Minister Indicates IDF Ground Operations In Gaza Could Resume

Amichai Stein at Israel's i24 posts on X: "Reports: IDF armored forces are reoccupying areas they had previously abandoned along the Natzrim corridor.[...] Israeli Defense Minister Israel Katz, in a message to the residents of Gaza: The evacuation of civilians from the battle zones will soon begin again, and the situation will become much more difficult, with you bearing the full consequences. Katz added: Return the hostages and remove Hamas – the alternative is total destruction and devastation."

MNI US TSYS: Treasuries Rally Post FOMC, Underscores Policy Patience

• Treasury futures surged off pre-FOMC session lows after the Federal Reserve held rates steady at 4.25-4.5%, while anticipating two 25bp cuts this year.
• The Fed also decided to slow the pace at which it is reducing Treasuries holdings in its balance sheet to a cap of USD5 billion per month from USD25 billion previously.
• Tsy Jun'25 10Y futures marked 110-14.5 low pre-FOMC, climbed to 111-03 as Chairman Powell discussed the Fed decision with reporters.
• Chairman Powell said the Fed is is well-positioned to sit tight and wait for policy uncertainty to subside before making any decisions on interest rates. "We are well positioned to wait for greater clarity."
• The majority of the action in currency markets following the Fed has been for the Japanese Yen, as the bull steepening for the treasury curve provided a significant JPY boost, undeterred by the strong rally for US equities.

MNI STIR: FOMC Announcement Trims Hawkish Repricing Seen Pre-Decision

• Fed Funds implied rates have more than reversed the day’s prior climb on the FOMC announcement and SEP.
• That’s despite more participants seeing fewer than two cuts (8 vs 4 previously) and fewer seeing more than three cuts (0 vs 2 previously) – see above for more details.
• A next 25bp Fed cut is shored up for the July meeting (26bp vs 24bp pre-announcement) whilst the 60bp of cuts for 2025 has shifted from 56bp pre-announce but is still at the hawkish end of the month-to-date and sizeable repricing from 90bps briefly priced last week.
• Cumulative cuts from 4.33% effective: 5bp May, 18bp Jun, 26bp Jul, 41bp Sep and 60bp Dec. 

OVERNIGHT DATA

MNI US DATA: Small Uptick In Mortgage Rates Sees Activity Moderate

• MBA composite mortgage applications dipped 6% (sa) last week in a small correction after a 34% increase in the prior two weeks.
• It was led by refis (-13% after 59% increase) whilst new purchases paused (0.1% after 17%).
• The pullback in refis came as the 30Y conforming rate increased 5bp to 6.72% after a 42bp decline since the January recent high of 7.09%.
• As a reminder of context, new purchase applications stand at 60% of 2019 averages vs 46% for refis. 

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 383.32 points (0.92%) at 41964.63
S&P E-Mini Future up 65.5 points (1.16%) at 5734.75
Nasdaq up 246.7 points (1.4%) at 17750.79
US 10-Yr yield is down 4.2 bps at 4.2408%
US Jun 10-Yr futures are up 8.5/32 at 111-2
EURUSD down 0.0041 (-0.37%) at 1.0904
USDJPY down 0.62 (-0.42%) at 148.64
WTI Crude Oil (front-month) up $0.3 (0.45%) at $67.20
Gold is up $11.48 (0.38%) at $3046.19

European bourses closing levels:
EuroStoxx 50 up 22.35 points (0.41%) at 5507.36
FTSE 100 up 1.43 points (0.02%) at 8706.66
German DAX down 92.64 points (-0.4%) at 23288.06
French CAC 40 up 56.9 points (0.7%) at 8171.47

US TREASURY FUTURES CLOSE

3M10Y -5.469, -5.851 (L: -6.042 / H: 1.243)
2Y10Y +2.313, 26.224 (L: 21.391 / H: 27.755)
2Y30Y +3.092, 57.213 (L: 50.46 / H: 58.951)
5Y30Y +1.565, 52.561 (L: 47.752 / H: 54.043)
Current futures levels:
Jun 2-Yr futures up 3.875/32 at 103-15.75 (L: 103-08.625 / H: 103-16.25)
Jun 5-Yr futures up 6.5/32 at 107-29.75 (L: 107-15 / H: 107-31)
Jun 10-Yr futures up 8.5/32 at 111-2 (L: 110-14.5 / H: 111-03)
Jun 30-Yr futures up 14/32 at 117-22 (L: 116-22 / H: 117-23)
Jun Ultra futures up 16/32 at 123-13 (L: 122-06 / H: 123-14)

MNI US 10YR FUTURE TECHS: (M5) Support Remains Intact

• RES 4: 113-00+ 2.0% 10-dma envelope
• RES 3: 112-13   1.500 proj of the Jan 13 - Feb 7 - Feb 12 price swing
• RES 2: 112-01/02 High Mar 4 / 1.382 proj of Jan 13-Feb 7-12 swing
• RES 1: 111-25   High Mar 11 
• PRICE:‌‌ 110-18 @ 1245 ET Mar 19
• SUP 1: 110-15+/12+ 20-day EMA / Low Mar 18
• SUP 2: 110-12+ Low Mar 6 & 13
• SUP 3: 110-01/00 50-day EMA / High Feb 7 and a key support
• SUP 4: 109-13+ Low Feb 24

The trend condition in Treasury futures is bullish and the recent pullback appears corrective. The bull cycle is reinforced by MA studies that are in a bull-mode condition. Recent gains have resulted in a print above 111-22+, the Dec 3 ‘24 high. A clear breach of this level would open 112-02 and 112-13, Fibonacci projections. Firm support is at 110-00, Feb 7 high. Support at the 20-day EMA, at 110-15+, has been pierced but remains intact.

SOFR FUTURES CLOSE

Mar 25 +0.005 at 95.688
Jun 25 +0.020 at 95.890
Sep 25 +0.045 at 96.125
Dec 25 +0.075 at 96.305
Red Pack (Mar 26-Dec 26) +0.075 to +0.085
Green Pack (Mar 27-Dec 27) +0.035 to +0.065
Blue Pack (Mar 28-Dec 28) +0.025 to +0.035
Gold Pack (Mar 29-Dec 29) +0.025 to +0.030

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

• 1M +0.00259 to 4.31937 (+0.00297/wk)
• 3M +0.00940 to 4.30469 (+0.00964/wk)
• 6M +0.01746 to 4.21726 (+0.01889/wk)
• 12M +0.03422 to 4.06520 (+0.04736/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.31% (-0.01), volume: $2.465T
• Broad General Collateral Rate (BGCR): 4.30% (-0.01), volume: $954B
• Tri-Party General Collateral Rate (TCR): 4.30% (-0.01), volume: $934B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $113B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $292B

FED Reverse Repo Operation

RRP usage climbs to $193.378B this afternoon from $149.503B Tuesday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 47 from 39 prior.

MNI PIPELINE: Corporate Bond Roundup: $500M BOC Luxembourg 3Y SOFR Priced

Dearth of issuance in the lead up to this afternoon's FOMC annc

• Date $MM Issuer (Priced *, Launch #)
• 03/19 $500M *BOC Luxembourg 3Y SOFR+50
• 03/19 $Benchmark Korea National Oil 3Y +120a, 3Y SOFR, 5Y investor calls
• Sometime next week:
• 03/-- $Benchmark LG Energy 3Y, 5Y, 10Y investor calls
• 03/-- $4B Bausch Health 7NC3 around 10.75%

MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform Ahead Of BoE

Gilts outperformed Bunds Wednesday ahead of the BoE.

• Core FI started strong amid a risk-off move on political volatility in Turkey, with the session's best levels hit in early morning European trade.
• From there, Bunds and Gilts softened alongside a nascent recovery in equities and oil prices, in a fairly subdued trading session for headline risk and data with attention paid to the Fed decision after the cash close.
• In data, Eurozone final March inflation showed services prrice pressures appear to have seen a material dip in February.
• The UK and German curves both twist flattened, with Gilts outperforming Bunds across the curve.
• Periphery / semi-core EGB spreads tightened in alignment with stronger equities.
• Thursday's calendar includes UK labour market data (preview here) and the BOE decision (preview here). It would be a huge surprise if there was anything other than a pause in the MPC’s cutting cycle with unchanged guidance, but the vote split will once again be in focus.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2bps at 2.196%, 5-Yr is up 0.5bps at 2.465%, 10-Yr is down 0.6bps at 2.804%, and 30-Yr is down 3.1bps at 3.09%.
• UK: The 2-Yr yield is up 0.5bps at 4.206%, 5-Yr is down 0.2bps at 4.293%, 10-Yr is down 1.2bps at 4.631%, and 30-Yr is down 1.5bps at 5.214%.
• Italian BTP spread down 0.8bps at 110bps / French OAT down 0.7bps at 67.6bps  

MNI FOREX: USDJPY Sinks Post-Fed, Technical Outlook Remain Bearish

• The majority of the action in currency markets following the Fed has been for the Japanese Yen, as the bull steepening for the treasury curve provided a significant JPY boost, undeterred by the strong rally for US equities. The moves come as the Federal Reserve decided to slow the pace at which it is reducing Treasuries holdings in its balance sheet to a cap of USD5 billion per month from USD25 billion previously.
• USDJPY was sharply lower post the decision falling around 50 pips from 149.90 to 149.40 ahead of Chair Powell’s press conference. The pair then gathered momentum to the downside through the earlier post-BOJ lows at 149.14, falling as low as 148.67.
• Overall, moving average studies remain in a bear-mode set-up, highlighting a dominant downtrend - this suggests short-term gains over the past week are corrective. Support is not seen until 147.75, the March 14 low.
• On the session as a whole, the greenback remains firmer against most G10 peers, emphasised by the 0.3% gains for the ICE dollar index.
• Weakness for EURUSD standout, having spent a large portion of the session back below the 1.0900 handle. Early slippage was on the back of wider risk concerns relating to the Turkish newsflow relating to the arrest of Istanbul mayor and key opposition figure Ekrem Imamoglu. Initial EURUSD support remains much lower – at 1.0761 and 1.0721, the 20-day EMA.
• Australia will release February employment data on Thursday keeping AUDUSD (-0.16%) in focus, particularly important given the RBA said that the strong labour market would have been the key reason to leave policy on hold in February.
• 0.6400 continues to provide solid pivot resistance for the pair, having not closed above this level since early December. Clearance of 0.6409, the Feb 21 high, would be required to strengthen a bull cycle and confirm a resumption of the uptrend that started Feb 3. On the downside, initial support to watch is 0.6259, the Mar 11 low.

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
20/03/2025	0700/0700	***	GB	Labour Market Survey
20/03/2025	0700/0800	**	DE	PPI
20/03/2025	0800/0900		EU	ECB's Lagarde At ECON Hearing
20/03/2025	0830/0930	***	CH	SNB PolicyRate
20/03/2025	0830/0930	***	SE	Riksbank Interest Rate Decison
20/03/2025	0830/0930	***	CH	SNB Interest Rate Decision
20/03/2025	0900/1000		NO	Q1 Regional Network Survey
20/03/2025	1000/1100	**	EU	Construction Production
20/03/2025	1100/1100	**	GB	CBI Industrial Trends
20/03/2025	1200/1200	***	GB	Bank Of England Interest Rate
20/03/2025	1200/1200	***	GB	Bank Of England Interest Rate
20/03/2025	1200/1300		EU	ECB's Lane At UCC Economics Society's Conference
20/03/2025	1200/1200		GB	Agents summary of business conditions
20/03/2025	1230/0830	*	CA	Industrial Product and Raw Material Price Index
20/03/2025	1230/0830	***	US	Jobless Claims
20/03/2025	1230/0830	**	US	WASDE Weekly Import/Export
20/03/2025	1230/0830	**	US	Philadelphia Fed Manufacturing Index
20/03/2025	1230/0830	*	US	Current Account Balance
20/03/2025	1400/1000	***	US	NAR existing home sales
20/03/2025	1430/1030	**	US	Natural Gas Stocks
20/03/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
20/03/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
20/03/2025	1650/1250		CA	BOC Governor speaks in Calgary
20/03/2025	1700/1300	**	US	US Treasury Auction Result for TIPS 10 Year Note
21/03/2025	2330/0830	***	JP	CPI
21/03/2025	0001/0001	**	GB	Gfk Monthly Consumer Confidence