MNI ASIA OPEN: Financial Stability Report, Orderly April

EXECUTIVE SUMMARY

• MNI US TSYS: Treasury Market Trading Stayed Orderly In April: Fed Report
• MNI US DATA: Independent Inflation Expectations Even Higher Despite Tariff Pause
• MNI US DATA: Tariff Pause Limits A Still Huge Climb In Inflation Expectations
• MNI US-RUSSIA: Kremlin Says Putin-Witkoff Talks Were "Constructive"
• MNI US DATA: Confidence Appears To Have Improved Since Tariff "Pause"; Still Poor

US

MNI US TSYS: Treasury Market Trading Stayed Orderly In April: Fed Report

Liquidity across financial markets including the Treasury market deteriorated after President Trump's April 2 reciprocal tariffs announcement but market functioning was generally orderly, according to the Federal Reserve's semiannual report on financial stability, released Friday. (PDF link is here)

• Treasury market liquidity has been poor for years and yields were particularly volatile in early April, contributing to a deterioration in market liquidity, the Fed said.
• Nevertheless "trading remained orderly, and markets continued to function without serious disruption," according to the report, which looked at information available as of April 11. 

NEWS

MNI US: Trump Says He Will Meet "A Lot Of Foreign Leaders" In Rome

US President Donald Trump and First Lady Melania Trump have departed Washington D.C. for Rome, where they will attend the funeral of Pope Francis. The trip is the first international travel for Trump, displacing a scheduled visit to Saudi Arabia, Qatar, and the United Arab Emirates next month from first on the list. The funeral is expected to provide an opportunity for sideline meetings between Trump and world leaders looking for clarity on trade policy, including a first meeting with European Commission President Ursula von der Leyen. Politico notes, a Commission spokesperson said that any opportunity to speak with key world leaders will “be seized.”

MNI US-RUSSIA: Kremlin Says Putin-Witkoff Talks Were "Constructive"

Reuters reporting comments from Russian President Vladimir Putin's foreign policy advisor, Yuri Ushakov, following a meeting with US President Donald Trump's special envoy Steve Witkoff at the Kremlin. Ushakov says, “Witkoff and Putin met for 3 hours, talks were constructive… talks brought the sides closer on Ukraine and other questions… There was discussion of renewing negotiations between Russia and Ukraine”

MNI FRANCE: Gov't In Fragile Position w/PM Bayrou Under Pressure

Prime Minister Francois Bayrou is under significant political pressure amid an ongoing scandal over his knowledge, or lack thereof, of decades-long child abuse at a school in his home district attended by some of his children. 

BBG: Global Money Managers Are Reluctant to Return to Chinese Stocks

Signs of a softening stance from the US on China tariffs may be a cue to buy the Asian nation’s stocks for some traders, but for long-term global funds the risk is still too high to pile into the market.

US TSYS

MNI US TSYS: Assessing Headline Risk, Rates & Stocks Firmer

• Treasuries looked to finish near moderate late session highs Friday, headline risk trumping data ahead of the weekend. Treasuries traded in a narrow range for much of the session, extending highs after Pres Trump tweeted he "Won't Drop China Tariffs Unless They Give Us Something" followed by "People Are Starting To Understand How Good Tariffs Are".
• Earlier headlines, however, suggested some thawing in US-China relations as an interview with President Trump was published in which he said he and China's Xi had been in contact, while the Chinese were considering easing tariffs on some US imports.
• Treasury futures pare gains slightly after higher than expected UofM sentiment & current conditions data. Overall 1Y inflation expectations were revised down to 6.5% (prelim 6.7%) in the final April release for a still large acceleration from 5.0% in March and its highest since 1981.
• Tsy Jun'25 10Y contract is currently +9.5 at 111-16.5 after climbing to high of 111-19.5 earlier. Curves mixed: 2s10s -1.377 at 49.790, 5s30s +0.637 at 84.464. Recent gains appear corrective and the resistance to watch is 111-25, the 50.0% retracement of the Apr 7 - 11 bear leg sell-off. Clearance of this level would undermine the bearish theme.
• Cross asset roundup: BBG US$ index firmer but on low end of the range: +1.30 at 1225.18; S&P eminis +28.0 at 5539.25, Gold broadly weaker but off lows (3308.25, -1.16%).

OVERNIGHT DATA

MNI US DATA: Independent Inflation Expectations Even Higher Despite Tariff Pause

• On top of that intra-survey chart above, which implies a further strong increase in 1Y inflation expectations in May judging by end-of-survey-period responses, there were some interesting details.
• Overall 1Y inflation expectations were revised down to 6.5% (prelim 6.7%) in the final April release for a still large acceleration from 5.0% in March and its highest since 1981.
• However, it came as those with Democrat leanings actually revised up their estimate a tenth to 8.0% (vs 6.3% in March) whilst independents were revised three tenths higher to 6.5% (vs 4.4%) for an even more pronounced high for a political breakdown that only started in late 2020.
• The offsetting factor was Republican-leaning respondents who revised their 1Y inflation expectations down five tenths to 0.4% (vs 0.1%).
• 5-10Y inflation expectations meanwhile were resilient to intra-month swings in US trade policy, with the 4.4% unrevised from the preliminary survey that had been collected Mar 25-Apr 8 prior to the Apr 9 90-day tariff pause. There weren’t any notable revisions by party, with no revisions for Democrats 5.1% (vs 4.6% in Mar) and Independents 4.4% (vs 3.8%) and a one tenth downward revision for Republicans at 1.5% (vs 1.5% in Mar). 

MNI US DATA: Confidence Appears To Have Improved Since Tariff "Pause"; Still Poor

Consumer sentiment readings in the University of Michigan survey improved in the final version compared with the prelim, reflecting the pullback in inflation expectations post-April 9 tariff "pause" as noted elsewhere.

• Current economic conditions (59.8 vs 56.5 prelim, 63.8 prior), expectations (47.3 vs 47.2 prelim, 52.6 prior), and overall consumer sentiment (52.2 vs 50.8 prelim, 57.0 prior) were all still at multi-month lows but improved from the preliminary reading. Expectations in the prelim had been the weakest since 1980, but is not "just" joint-lowest since then (July 2022 was also 47.3).
• The most notable movers in survey responses vs prelim were "good time to buy a major household item (82 vs 75 prelim, 89 prior), so now just the lowest since November 2024 vs what in prelim looked like the weakest since November 2022; with "business expectations over the last few months" plummeting to 1 (vs 13 prelim, 23 prior), the latter joint-lowest since summer 2020.
• The % seeing job losses for either themselves and/or their spouse over the next 5 years ticked lower to 21.1% (22.5% prelim, 23.1% prior) but this was still very elevated.
• However despite the apparent tariff reprieve, there was only a 1 point improvement to 52 in "government doing a good job fighting inflation and unemployment" - still the lowest since 2011 and around historic lows.

MNI US DATA: Tariff Pause Limits A Still Huge Climb In Inflation Expectations

• 1Y inflation expectations: 6.5% (cons 6.8, prelim 6.7) in the final April release after 5.0%, lower than expected but nevertheless the highest since 1981. 5Y inflation expectations: 4.4% (cons 4.4, prelim 4.4) after 4.1%.
• Interestingly, and helpfully, U.Mich broke out developments in responses over the month to the question on 1Y inflation expectations. It's a necessary addition as the preliminary survey had come through Mar25-Apr8 just prior to Trump’s partial tariff reversal with a lowering of reciprocal tariffs and the 90-day pause whilst dialling up pressure on China.
• See text and chart below: “inflation expectations evolved with major trade policy announcements this month. After the April 9 partial pause in tariff increases, inflation expectations ebbed but remained substantially elevated relative to March. Long-run inflation expectations climbed from 4.1% in March to 4.4% in April, reflecting a particularly large jump among independents."
• The chart makes it clear that 1Y expectations had been running between 5-6% in early readings before the Apr 2 "Liberation Day" tariff announcements after which they surged to nearly 10% before the pause and then eased to 7-8% thereafter (implying another strong climb in next month's survey).
• Full release here.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 43.57 points (-0.11%) at 40043.73
S&P E-Mini Future up 29.5 points (0.54%) at 5538.25
Nasdaq up 171.8 points (1%) at 17324.77
US 10-Yr yield is down 5.3 bps at 4.2623%
US Jun 10-Yr futures are up 10/32 at 111-17
EURUSD down 0.0019 (-0.17%) at 1.1371
USDJPY up 0.94 (0.66%) at 143.57
Gold is down $40.94 (-1.22%) at $3308.11

European bourses closing levels:
EuroStoxx 50 up 39.14 points (0.77%) at 5154.12
FTSE 100 up 7.81 points (0.09%) at 8415.25
German DAX up 177.94 points (0.81%) at 22242.45
French CAC 40 up 33.48 points (0.45%) at 7536.26

US TREASURY FUTURES CLOSE

3M10Y -5.103, -5.001 (L: -5.836 / H: 0.167)
2Y10Y -1.366, 49.801 (L: 46.89 / H: 52.05)
2Y30Y -0.612, 96.646 (L: 91.943 / H: 98.498)
5Y30Y +1.058, 84.885 (L: 80.395 / H: 85.409)
Current futures levels:
Jun 2-Yr futures up 1.5/32 at 103-25.75 (L: 103-22.375 / H: 103-26.375)
Jun 5-Yr futures up 5.75/32 at 108-20 (L: 108-10.5 / H: 108-21.75)
Jun 10-Yr futures up 10/32 at 111-17 (L: 111-02.5 / H: 111-19.5)
Jun 30-Yr futures up 23/32 at 115-29 (L: 114-28 / H: 116-02)
Jun Ultra futures up 20/32 at 120-4 (L: 119-01 / H: 120-17)

MNI US 10YR FUTURE TECHS: (M5) Monitoring Resistance

• RES 4: 113-04   76.4% retracement of the Apr 7 - 11 bear leg
• RES 3: 112-12   61.8% retracement of the Apr 7 - 11 bear leg
• RES 2: 111-25   50.0% retracement of the Apr 7 - 11 bear leg  
• RES 1: 111-18+ High Apr 23
• PRICE:‌‌ 111-14.5 @ 1310 ET Apr 25
• SUP 1: 110-15/109-08 Low Apr 15 / 11 and the bear trigger
• 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 are trading below this week’s high of 111-18+ (Apr 23). Recent gains appear corrective and the resistance to watch is 111-25, the 50.0% retracement of the Apr 7 - 11 bear leg sell-off. Clearance of this level would undermine the bearish theme. A resumption of weakness would refocus attention on 109-08, the Apr 11 low and the bear trigger. Clearance of this level would resume the downtrend.

SOFR FUTURES CLOSE

Jun 25 +0.010 at 95.885
Sep 25 +0.015 at 96.260
Dec 25 +0.020 at 96.540
Mar 26 +0.025 at 96.725
Red Pack (Jun 26-Mar 27) +0.030 to +0.040
Green Pack (Jun 27-Mar 28) +0.040 to +0.050
Blue Pack (Jun 28-Mar 29) +0.055 to +0.055
Gold Pack (Jun 29-Mar 30) +0.055 to +0.065

REFERENCE RATES (PRIOR SESSION)
​​​​​​​
US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.29% (+0.01), volume: $2.542T
• Broad General Collateral Rate (BGCR): 4.28% (+0.01), volume: $1.049T
• Tri-Party General Collateral Rate (TCR): 4.28% (+0.01), volume: $1.012T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $103B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $303B

FED Reverse Repo Operation

RRP usage retreats below $100B to $94.021B this afternoon from $130.004B yesterday. 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. The number of counterparties at 27.

MNI PIPELINE: Corporate Bond Roundup

ADB upsized from $500 to $750M priced earlier:

• Date $MM Issuer (Priced *, Launch #)
• 04/25 $750M *ADB tap 2028 SOFR+36
• $9.1B Priced Thursday, $31.65B/wk

MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform As Trade Headlines Stay Dominant

European curves flattened Friday, with Gilts outperforming Bunds.

• Once again, US trade developments were at the forefront of global markets, with early headlines suggesting some thawing in US-China relations as an interview with President Trump was published in which he said he and China's Xi had been in contact, while the Chinese were considering easing tariffs on some US imports.
• UK retail sales surprised to the upside for a third consecutive month, helping Gilt yields open higher, but 10Y yields would close on the lows.
• Bund yields opened higher and traded within the prior session's ranges for the remainder of the day.
• The German curve bear flattened on the day, with the UK's slightly flatter (parallel shift down in yields through the 10Y segment, with 30Y outperforming). For the week as a whole, the German curve twist flattened  (2Y +3.3bp, 10Y -0.3bp), with the UK's bull flattening (2Y -6.2bp, 10Y -8.7bp).
• Periphery / semi-core EGB spreads closed modestly wider, though came off widest levels of the session.
• Next week's calendar includes flash Eurozone inflation prints for April and a first look at Q1 GDP across EZ member states.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.4bps at 1.719%, 5-Yr is up 2.9bps at 2.017%, 10-Yr is up 2.1bps at 2.469%, and 30-Yr is up 1.2bps at 2.889%.
• UK: The 2-Yr yield is down 2.1bps at 3.858%, 5-Yr is down 2.1bps at 3.974%, 10-Yr is down 2.1bps at 4.479%, and 30-Yr is down 2.5bps at 5.219%.
• Italian BTP spread up 0.8bps at 110.5bps / Spanish up 1.1bps at 65.4bps

MNI FOREX: Japanese Yen Weakness Stands Out Amid More Stable Markets

• The relatively stable and more constructive tone for risk sentiment this week has weighed on the low yielding currencies, helping the likes of USDJPY extend its corrective cycle. This dynamic continues to play out as we approach the weekend, with the pair briefly testing the 144 handle, representing a near 3% recovery from the Tuesday low.
• While a notable recovery, spot remains shy of initial resistance, which comes in at 144.56, the 20-day EMA. A clear break of this level would signal scope for a stronger recovery and might target firmer resistance at the 50-day EMA, around 147.40. Overall, moving average studies are in a bear-mode position highlighting a dominant downtrend for now.
• The recent pullback in EURJPY appears corrective and today’s 0.75% advance underpins this theme. Attention is on 164.19, the Mar 18 high and a bull trigger. Clearance of this hurdle would resume the uptrend.    
• Elsewhere in G10, SEK and NZD have also weakened notably, however other major pairs have exhibited tighter trading ranges.
• Initial dollar strength weighed on EURUSD, prompting a low print of 1.1316. Dips to the low 1.13s have been well supported across the final three sessions of the week, keeping a bullish trend condition intact. Key support is unchanged at the 20-day EMA, at 1.1201. A break of this average would signal scope for a deeper retracement.
• Canada holds elections to its 45th Parliament on Monday, 28 April, amid a political landscape that has changed beyond all recognition since the start of the year. Separately next week, Eurozone inflation data, the BOJ and US employment are all calendar highlights.

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
28/04/2025	0600/0800	**	SE	PPI
28/04/2025	1000/1100	**	GB	CBI Distributive Trades
28/04/2025	1400/1000	**	US	housing vacancies
28/04/2025	1430/1030	**	US	Dallas Fed manufacturing survey
28/04/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
28/04/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
29/04/2025	2301/0001	*	GB	BRC Monthly Shop Price Index