MNI ASIA OPEN: Fed Remains Patient Amid Uncertainty
EXECUTIVE SUMMARY
- MNI FED: Warsh - Smaller Fed Balance Sheet Would Help Economy
- MNI FED: Bostic Supports No Rate Adjustment Amidst Uncertainty
- MNI FED: Williams Echoes No Hurry To Cut Rates
- MNI FED: Kugler Sees It Most Likely That US Close To Maximum Employment
- MNI TARIFFS: Navarro And Hassett Say UK Trade Deal Will Act As Template
- MNI STIR: Fed Rate Path Close To Recent Hawkish Extremes Before US-China Talks
US
MNI FED: Warsh - Smaller Fed Balance Sheet Would Help Economy
A smaller Federal Reserve balance sheet would benefit the economy by creating greater clarity about the central bank's main policy instrument and allowing officials to heed closer to traditional policy rules, former Fed Governor Kevin Warsh, a leading candidate to replace Fed Chair Powell at the central bank's helm, said Friday. "There are many benefits of a smaller balance sheet," Warsh said, including "better economic outcomes."
MNI FED: Bostic Supports No Rate Adjustment Amidst Uncertainty
Atlanta Fed’s Bostic (non-voter) offered post-FOMC thoughts in a post, echoing broader FOMC rhetoric that it’s not prudent to adjust rates with so much uncertainty. The economy should still be resilient but less so than we expected earlier this year. See his full remarks here. He supported the decision to leave rates on hold, citing the potential continuation of the current period of uncertainty. "Uncertainty is still pervasive in the economy, and business contacts tell my staff and me that they expect uncertainty to persist longer than they had anticipated earlier this year. I don't think it's prudent to adjust monetary policy with so little visibility of the path ahead."
MNI FED: Williams Echoes No Hurry To Cut Rates
NY Fed’s Williams (permanent voter) prepared remarks (here) focused on central bank credibility - the bedrock of central banking is anchored inflation expectations - but subsequent Q&A and a separate Bloomberg TV have offered some more color that suggests a similar stance to Powell. That’s of some note with Williams one of the most dovish members of the FOMC although we also see Powell as dovish leaning compared to the broader committee. In particular, there appears no rush to cut rates.
MNI FED: Kugler Sees It Most Likely That US Close To Maximum Employment
Fed Governor Kugler (permanent voter) views the labor market as stable and likely close to maximum employment, somewhat echoing Chair Powell on Wednesday saying “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid”. Kugler’s full remarks on "Assessing Maximum Employment" can be found here.
MNI FED: Barr Sees Policy In Good Position But May Face Conflicting Dual Mandate
Fed Governor Barr (permanent voter) offers a similar stance to Chair Powell from Wednesday’s press conference, although appears a little more concerned about the prospects of facing conflicting dual mandate goals than Powell who said it’s “not one that we face today. And we may never face it. But, you know, we have to be keeping it in our thinking now.” Barr's full remarks on "Artificial Intelligence and the Labor Market: A Scenario-Based Approach" can be found here.
MNI STIR: Fed Rate Path Close To Recent Hawkish Extremes Before US-China Talks
- Cumulative cuts from 4.33% effective: 5bp Jun, 17.5bp Jul, 35.5bp Sep, 51bp Oct and 68bp Dec. A recap of the week’s hawkish readjustment:
- Monday’s hawkish reaction to a better-than-expected ISM Services report was reversed on Tuesday but still held onto a significant hawkish re-pricing seen in the second half of the prior week on a better-than-expected ISM Manufacturing report (Thu) before a solid payrolls report (Fri).
- Wednesday’s FOMC decision had little net immediate reaction, with a modest dovish read on the announcement itself reversed in Powell’s press conference, but prospects of a US-UK trade pact floated afterwards helped extend trade optimism following a touting of a removal of Biden-era chip curbs.
- Rather than a "sell the fact” reaction to Thursday’s actual US-UK trade pact announcement, the sell-off in US rates accelerated and set the tone for the remainder of the week.
- A typically dovish Williams today keeping to a similar stance to Powell might have helped at the margin but the moves are likely on expectations of some positive developments at Saturday’s Geneva-based talks between the US and China, led by US Tsy Sec Bessent and China Vice Premier He Lifeng.
- A next Fed cut is fully priced for the Sept FOMC (17.5bp for July) before a cumulative 68bp of cuts for the year.
- SOFR implied terminal yields have seen a smaller increase over the week but are still 4bp higher, at ~3.25% (seen in SFRZ6 vs U6 a week ago). That’s a large adjustment from sub 2.9% prior to Thursday’s ISM mfg but still 15bp lower than before Apr 2 Liberation Day tariff announcement levels.
NEWS
MNI TARIFFS: Navarro And Hassett Say UK Trade Deal Will Act As Template
US President Donald Trump’s senior trade advisor, Peter Navarro, told Bloomberg TV that the UK trade deal is “significant not just as a deal but a template for future deals.”
- White House NEC Director Kevin Hassett noted to CNBC similarly the deal is a “framework for future deals”, although Axios points out that upcoming negotiations must overcome "deeper mutual hostility, bigger trade imbalances, and more complex disputes” than the UK.
- Navarro said on issues facing negotiations: “India has the highest tariffs of any of our major trading partners… Japan is the most clever at protecting its own markets… Germany has auto tariffs at 10% where we have them at 2.5%. They also have the VAT tax which acts as another 19% tariff and export subsidies.”
MNI TARIFFS: Switzerland Should Be In Line For US Trade Deal - Swiss President
Reuters carrying comments from Swiss President Karin Keller-Sutter talking up the prospect of striking a US-Swiss trade deal during US Treasury Secretary Scott Bessent’s visit to the country, where he will also hold talks with Chinese Vice Premier He Lifeng.
- Keller-Sutter says Switzerland, “should be one of the next countries to reach an agreement in principle with the US,” noting that “Switzerland does not subsidise industry” – one of the primary non-tariff barriers the Trump administration is trying to eliminate.
- Keller-Sutter says Switzerland expects to be “treated equally” and is in a “group of countries that are now treated swiftly”.
MNI UKRAINE: Zelenskyy Convenes 'Coalition Of The Willing' Leaders Summit For 10 May
Speaking virtually to the Joint Expeditionary Force (JEF) meeting in Oslo, Norway, Ukrainian President Volodymyr Zelenskyy says that there will be a summit of leaders from the 'Coalition of the Willing' tomorrow (Saturday, 10 May) in Kyiv. The JEF is a UK-founded group of 10 northern European countries (UK, Denmark, Estonia, Latvia, Lithuania, the Netherlands, Norway, Finland, Sweden, and Iceland) established in 2014 as a 'complement' to NATO.
MNI UKRAINE: RTRS-French Diplo: US & Europe Working On 30 Day Ceasefire Proposal
Reuters reporting comments from a French diplomatic source regarding the summit of the 'Coalition of the Willing' being hosted tomorrow (10 May) by Ukrainian President Volodymyr Zelenskyy in Kyiv. Says that Foreign Minister Jean-Noel Barrot is on his way to the Ukrainian capital to represent President Emmanuel Macron. Says that the US and European are working to put together a proposal for a 30-day Russia-Ukraine ceasefire. The leaders of the 'Coalition of the Willing' (UK PM Sir Keir Starmer and Macron) and US President Donald Trump have each put forward their own ideas for a month-long halt in hostilities, but it would appear that both sides are keen to get a single deal agreed to.
MNI JAPAN: Kyodo-Draft Defence White Paper: Sino-Russian Links A 'Grave Concern'
Kyodo News reports that a draft of the 2025 Defence White Paper, due to be presented to the cabinet as early as July, "criticises the strengthening of cooperation between China and Russia, including military activities, as "a grave concern for our national security." It points out that China and Russia are strengthening their capabilities to hinder other countries' use of space, and that there is a possibility that nations and militaries are involved in cyber attacks."
US TSYS
MNI US TSYS: Fed Speakers Echo Chairman Powell, No Hurry to Cut Rates
- Treasuries look to finish steady (TYM5) to mildly mixed, curves flatter with Bonds weaker late Friday.
- Rates bounced after Pres Trump posted on his media platform that a 80% tariff on China "seems right", but is "up to Scott B" (referring to Treasury Secretary Scott Bessent).
- The WSJ reported "President Trump's suggestion of lowering tariffs on Chinese imports to 80% was just a number he "threw out there," White House press secretary Karoline Leavitt said without explaining more on how he arrived at the figure."
- Multiple Fed speakers commented on the economy after exiting the policy blackout. A smaller Federal Reserve balance sheet would benefit the economy by creating greater clarity about the central bank's main policy instrument and allowing officials to heed closer to traditional policy rules, former Fed Governor Kevin Warsh.
- Atlanta Fed Bostic supports no rate adjustment amid uncertainty while NY Fed’s Williams echoes Chairman Powell's view there is no hurry to cut rates. Speakers resume at this evening's Hoover conference at 1945ET with StL Fed Musalem, Cleveland Fed Hammack & Fed Gov Cook on policy panel with ECB's Schnabel.
- Slow start to the week ahead, main focus is on next Tuesday's CPI inflation data for April, Retail Sales next Thursday.
OVERNIGHT DATA
No data Friday, but multiple Fed speakers as outlined above.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 91.41 points (-0.22%) at 41272.78
S&P E-Mini Future down 0.25 points (0%) at 5684
Nasdaq up 17.6 points (0.1%) at 17943.71
US 10-Yr yield is up 0.2 bps at 4.3804%
US Jun 10-Yr futures are down 0.5/32 at 110-25
EURUSD up 0.0021 (0.19%) at 1.1249
USDJPY down 0.56 (-0.38%) at 145.35
WTI Crude Oil (front-month) up $1.08 (1.8%) at $61.00
Gold is up $21.64 (0.65%) at $3327.31
European bourses closing levels:
EuroStoxx 50 up 20.8 points (0.39%) at 5309.74
FTSE 100 up 23.19 points (0.27%) at 8554.8
German DAX up 146.63 points (0.63%) at 23499.32
French CAC 40 up 49.31 points (0.64%) at 7743.75
US TREASURY FUTURES CLOSE
3M10Y +1.127, 5.513 (L: 1.798 / H: 7.081)
2Y10Y -0.271, 49.569 (L: 48.616 / H: 52.903)
2Y30Y -0.907, 95.562 (L: 94.66 / H: 100.914)
5Y30Y -0.957, 84.663 (L: 84.313 / H: 89.129)
Current futures levels:
Jun 2-Yr futures up 0.5/32 at 103-17.375 (L: 103-17.25 / H: 103-20.5)
Jun 5-Yr futures down 0.25/32 at 108-2 (L: 108-02 / H: 108-10)
Jun 10-Yr futures down 1/32 at 110-24.5 (L: 110-23.5 / H: 111-03)
Jun 30-Yr futures down 4/32 at 114-9 (L: 113-25 / H: 114-19)
Jun Ultra futures down 9/32 at 117-29 (L: 117-08 / H: 118-10)
MNI US 10YR FUTURE TECHS: (M5) Bear Cycle Extension
- 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: 111-22 / 112-01+ High May 7 / 2
- PRICE: 110-30+ @ 1200 ET May 9
- SUP 1: 110-22 Low May 8
- SUP 2: 110-16+ Low Apr 22
- SUP 3: 110-01+/00 76.4% of the Apr 11 - May 1 bull leg / 100-dma
- SUP 4: 109-08 Low Apr 24
Treasury futures are off lows, but traded sharply lower Thursday, marking an extension of the bear cycle that started at the beginning of May. Recent weakness undermines a bullish theme. The contract has traded through the 50-day EMA, at 110-31+. A clear break of this average would strengthen a bearish threat and expose 110-16+, the Apr 22 low. For bulls, price needs to trade above key S/T resistance at 112-20+, the May 1 high, to reinstate a bullish theme.
SOFR FUTURES CLOSE
Jun 25 steady00 at 95.745
Sep 25 steady00 at 96.055
Dec 25 steady00 at 96.330
Mar 26 +0.005 at 96.535
Red Pack (Jun 26-Mar 27) +0.010 to +0.010
Green Pack (Jun 27-Mar 28) steady
Blue Pack (Jun 28-Mar 29) -0.005 to -0.005
Gold Pack (Jun 29-Mar 30) -0.01 to -0.005
REFERENCE RATES (PRIOR SESSION)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.29% (-0.01), volume: $2.545T
- Broad General Collateral Rate (BGCR): 4.28% (-0.01), volume: $1.066T
- Tri-Party General Collateral Rate (TCR): 4.28% (-0.01), volume: $1.034T
- (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: $313B
FED Reverse Repo Operation
RRP usage inches up to $142.272B this afternoon from $139.768B yesterday, total number of counterparties at 31. 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: $49B Issued This Week
$9.7B Priced Thursday, $49B total for the week:
- Date $MM Issuer (Priced *, Launch #)
- 05/08 $5.5B *HSBC $2.25B 6NC5 +125, $1.25B 6NC5 SOFR+157, $2B 11NC10 +140
- 05/08 $1.5B *Fair Isaac 8NC3 6%
- 0508 $1.25B *Newell Brands 3NC 8.5%
- 05/08 $750M *AIB Group 6NC5 +133
- 05/08 $700M *Caixa Economica 5Y 5.875%
MNI FOREX: USD Backtracks Thurs Gains, But Conviction Looks Light
- Having rallied against all others on Thursday, the dollar backtracked for much of Friday trade, despite various White House cabinet members talking up the possibility of further trade deals from various countries in the very short-term.
- Markets are also on watch for any news stemming from the beginning of the US-China trade talks over the weekend. While no major breakthroughs are expected, markets were on alert after Trump posited that 80% China tariffs "seems right", although the final decision will be with his Treasury Secretary. Tariffs at 80% are still uncomfortably close to the levels the Chinese believe are effectively a trade embargo - and will still severely limited crossborder flows.
- As such, equities were sold on Trump's thought, which fed into renewed pressure on USD/JPY, confirming recent gains as corrective in nature. The 50-day EMA, at 146.22, remains intact for now. A clear break of this EMA would highlight a possible reversal. Moving average studies are in a bear-mode position and continue to highlight a dominant downtrend.
- Focus for next week rests on the April US CPI print - at which inflation is expected to hold steady at 2.4% for the headline Y/Y. A higher print would justify the cautious approach to the last FOMC rate decision, on which most Fed members seemed to affirm their preference for a gradual approach to policy in speeches Friday.
- GBP was among the better performers Friday, aiding GBP/USD to a near 100 pip bounce off the overnight low. Volumes were atypically light, with cumulative activity near 30% short of recent averages - meaning the recovery may be built on only light conviction. As such, attention remains on the recent breach of support at 1.3249, the 20-day EMA. This signals scope for a deeper correction. Note too that a minor head and shoulders formation has developed on the daily chart.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 12/05/2025 | 0500/1400 |  JP | Economy Watchers Survey | |
| 12/05/2025 | 0800/0900 |  GB | BOE Lombardelli At BOE Bank Watcher's Conference | |
| 12/05/2025 | 1030/1130 | GB | BOE Greene On Monetary policy outlook | |
| 12/05/2025 | - | *** |  CN | Money Supply |
| 12/05/2025 | - | *** | CN | New Loans |
| 12/05/2025 | - | *** | CN | Social Financing |
| 12/05/2025 | - |  EU | ECB's Cipollone At Eurogroup Meeting | |
| 12/05/2025 | 1250/1350 | GB | BOE Mann On Neutral Rate Of Interest | |
| 12/05/2025 | 1425/1025 |  US | Fed Governor Adriana Kugler | |
| 12/05/2025 | 1430/1530 | GB | DMO likely to publish FQ2 consultation agenda | |
| 12/05/2025 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 12/05/2025 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 12/05/2025 | 1600/1200 | *** | US | USDA Crop Estimates - WASDE |
| 12/05/2025 | 1600/1700 | GB | BOE Taylor Fireside Chat With Ed Balls | |
| 12/05/2025 | 1800/1400 | ** | US | Treasury Budget |
| 13/05/2025 | 2301/0001 | * | GB | BRC-KPMG Shop Sales Monitor |
