MNI ASIA OPEN: Inflation Trends Rising, Tariff Impacts

EXECUTIVE SUMMARY

• MNI BRIEF: Fed Will Be Slow To Cut Interest Rates - Dudley
• MNI US: Johnson Suggests Congress Could Restrain Trump On Tariffs
• MNI US DATA: Chicago Business Barometer™ - Slipped To 44.6 in April
• MNI US DATA: Real GDP Beats Latest Tracking With Solid Private Domestic Demand
• MNI US TSYS/SUPPLY: Refunding: No Guidance Change; X-Date Update Coming In May
• MNI US DATA: Tepid ADP Employment, Hard To Pin Directly On Tariff Disruption

US

MNI BRIEF: Fed Will Be Slow To Cut Interest Rates - Dudley

The Federal Reserve must keep a close eye on inflation expectations and work to maintain anchored prices, likely resulting in its being slow to lower interest rates in the coming months, former New York Fed President William Dudley said Wednesday.  "One reason why the Federal Reserve will probably be fairly slow to cut rates over the next few months is because of concerns that if they make an error and it turns out that the inflation expectations do become unanchored that would make it much more difficult to get inflation back down to their 2% objective," Dudley said in Q&A, as part of a G30 Special Report Webinar on the Fed's framework. 

NEWS

MNI WHITE HOUSE: Trump Calls For Patience On Tariffs, Economy & Stock Market

US President Donald Trump posts on Truth Social: "This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers. Our Country will boom, but we have to get rid of the Biden “Overhang.” This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!"

MNI US: Senate Expected To Vote Today On Symbolic Resolution To Block Trump Tariffs

The Senate is expected to vote today on a resolution to block President Donald Trump’s 'reciprocal' tariffs. The resolution, if it makes it to the floor, is largely symbolic as House Speaker Mike Johnson (R-LA) has taken steps to block the mechanism by which lawmakers can force a House vote.

MNI US: Johnson Suggests Congress Could Restrain Trump On Tariffs

House Speaker Mike Johnson (R-LA) has suggested that Congress could step in to moderate President Donald Trump’s trade agenda if there was an “imbalance” that encroached on the constitutional power of Congress, but stressed he would first “call the president and talk with him." Johnson said at an Axios event today: "I think the executive has a broad array of authority that's been recognized over the years. If it gets close to where the imbalance is there, then we would step in."

US TSYS

MNI US TSYS: Tsys & Stocks Break Resistance, Month End Partially Cited

• Treasuries broke through narrow session range late Wednesday, look to finish mostly higher, curves moderately steeper with bonds underperforming all day.
• Early data driven volatility, Tsys tested major resistance after softer than expected April ADP at 62k (sa, cons 115k) after a downward revised 147k (initial 155k) in March.
• Rates and equities reverse course - extended lows after higher than expected GDP Price index, Personal Consumption and Core PCE data. Stocks rebounded after solid PCE income growth reflected in the PCE data partially offset by tariff impacts.
• Jun'25 10Y currently +7.5 at 112-12.5 vs. -16 high (10Y yld currently 4.1562%), resistance at 112-16 (1.0% 10-dma envelope) followed by 113-04 (76.4% retracement of the Apr 7 - 11 bear leg).
• Trade negotiation related headlines continued to deliver real vol to markets, but it appeared late bounce in rates and stocks was at least partially month end related.

OVERNIGHT DATA

MNI US DATA: Chicago Business Barometer™ - Slipped To 44.6 in April

The Chicago Business Barometer™, produced with MNI slipped 3.0 points to 44.6 in April. This more than reverses March’s 2.1 point rise, but still leaves the index above January’s 39.5 reading. The index has been in contraction for seventeen consecutive months. The decrease was driven by a pullback in new orders and production, and to a lesser extent supplier deliveries. Order backlogs and employment rose relative to March.

MNI US DATA: Core PCE Surprises Higher in Q1, Monthly Details To Be Revealed Shortly

• Core PCE inflation was higher than expected in Q1 at 3.46% annualized (cons 3.1) after 2.64% in Q4.
• Our basic calculations had suggested a ~3.3% figure was possible considering scope for the February upward revision after portfolio management details in the PPI report earlier this month.

MNI US DATA: Recapping Latest PCE Inflation Trends

Core PCE: 

• 2.65% Y/Y drops from 2.96% in Feb for lowest since Jun 2024. However:
• 3.5% annualized over three months vs 2.4% in Dec
• 3.0% annualized over six months

Supercore PCE: 

• 3.25% Y/Y from 3.65% in Feb for lowest since Jan. Recent trends also running hotter:
• 3.9% annualized over three months vs 3.7% in Dec
• 3.8% annualized over six months

MNI US DATA: PCE: Solid Income Growth Overshadowed By Tariff Impacts

March's Personal Income and Outlays report showed a strong partly tariff-related pickup in real consumption in March that couldn't offset a weaker quarter as a whole. That said, personal income dynamics were fairly robust at quarter-end, suggesting that despite collapsing sentiment, there is still scope for consumer demand to remain underpinned heading into Q2. The least we can say is that if there is a recession looming, it did not start in March based on these data.

MNI US DATA: Real GDP Beats Latest Tracking With Solid Private Domestic Demand

Real GDP was close to expectations in the Q1 advance, although to us that in itself was surprising as there hadn’t been enough time for consensus to fully adjust to a sharp increase in consumer imports in March data released the day before on Tuesday. Hiding beneath some significant crosscurrents from net trade and inventories, private domestic demand was surprisingly little changed from its 2024 average but no doubt with question marks over the extent to which it’s been boosted by tariff front-running. 

MNI US TSYS/SUPPLY: Refunding: No Guidance Change; X-Date Update Coming In May

• Treasury kept its guidance on coupon auction sizes unchanged. It "anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters."
• No estimate at this time of how long Treasury's cash and extraordinary measures may last. "We expect to provide an update during the first half of May after the majority of receipts from the April income tax filing season have been received." Treasury's anticipated auction sizes for the May to July 2025 quarter are as follows (in biliions USD): 

MNI US TSYS/SUPPLY: TBAC Less Sure About Guidance Changes, Given Volatile Backdrop

 The Treasury's advisory committee (TBAC) appeared to be less convinced this quarter that guidance on future issuance should be changed, apparently because of the recent volatility in Treasury market uncertainty amid an uncertain backdrop: "members were mixed on the value of the forward guidance language. Some members preferred dropping the language altogether, while others felt a shift in the language might be received poorly in light of the meaningful increase in uncertainty around tariffs and the economic outlook."

MNI US DATA: Tepid ADP Employment, Hard To Pin Directly On Tariff Disruption

• ADP employment was softer than expected in April at 62k (sa, cons 115k) after a downward revised 147k (initial 155k) in March. It’s the fourth weakest seasonally adjusted monthly increase since Jul 2020 and sees a continuation of a trend softening seen since late 2024.

MNI US DATA: Mortgage Activity Continues To Adjust Higher Rates, Some Relief Ahead

• MBA composite mortgage applications fell -4.2% (sa) last week as they continued to adjust to higher mortgage rates. It follows -12.7% and -8.5% after +20% in previous weeks, leaving the level of composite applications at the lowest since January.
• Purchases led declines in latest data for once (-4.4% after -6.6%) to leave them 57% of 2019 levels, whilst refis moderated after some heavy declines (-3.7% after -20%) at 37% of 2019 levels.

MNI CANADA DATA: Canada GDP Q1 Flash +1.5% Annualized Slightly Below BOC Estimates

• GDP by industry +1.5% annualized for Q1, Statistics Canada said Wednesday, slightly below Bank of Canada's +1.8% estimate in April Monetary Policy Report. StatsCan's advance forecast for March +0.1% MOM, putting QOQ growth +0.4%.
• Increase in March supported by mining, quarrying and oil and gas extraction but gains were offset by decline in manufacturing and wholesale. 

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 141.74 points (0.35%) at 40669.36
S&P E-Mini Future up 20.75 points (0.37%) at 5606.5
Nasdaq down 15 points (-0.1%) at 17446.34
US 10-Yr yield is down 2.3 bps at 4.1485%
US Jun 10-Yr futures are up 8.5/32 at 112-13.5
EURUSD down 0.0062 (-0.54%) at 1.1326
USDJPY up 0.69 (0.48%) at 143.02
WTI Crude Oil (front-month) down $2.26 (-3.74%) at $58.16
Gold is down $23.18 (-0.7%) at $3294.30

European bourses closing levels:
EuroStoxx 50 down 1.68 points (-0.03%) at 5160.22
FTSE 100 up 31.39 points (0.37%) at 8494.85
German DAX up 71.15 points (0.32%) at 22496.98
French CAC 40 up 38 points (0.5%) at 7593.87

US TREASURY FUTURES CLOSE

3M10Y -1.81, -14.064 (L: -16.821 / H: -7.606)
2Y10Y +3.208, 54.974 (L: 48.617 / H: 56.519)
2Y30Y +7.481, 106.979 (L: 94.873 / H: 109.644)
5Y30Y +6.985, 95.1 (L: 84.296 / H: 97.561)
Current futures levels:
Jun 2-Yr futures up 3.375/32 at 104-3.5 (L: 103-30.875 / H: 104-04.375)
Jun 5-Yr futures up 8/32 at 109-11 (L: 108-30 / H: 109-12.75)
Jun 10-Yr futures up 8/32 at 112-13 (L: 111-26.5 / H: 112-16)
Jun 30-Yr futures down 7/32 at 116-27 (L: 116-02 / H: 117-21)
Jun Ultra futures down 17/32 at 121-7 (L: 120-11 / H: 122-20)

MNI US 10YR FUTURE TECHS: (M5) Bull Cycle Extends

• 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: 112-16   1.0% 10-dma envelope
• RES 1: 112-12+ Intraday high
• PRICE:‌‌ 112-09 @ 16:52 BST Apr 30
• SUP 1: 111-07+ 20-day EMA
• SUP 2: 110-16+/109-08 Low Apr 22 / 11 and the bear trigger
• SUP 3: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
• SUP 4: 108-21   Low Feb 19

Treasury futures are trading higher this week as the contract extends the latest rally. Recent gains have resulted in a break of 111-25, 50.0% of the Apr 7 - 11 bear leg. The breach undermines a recent bearish theme, strengthened by the brief show through 112-12, the 61.8% retracement. This opens 112-16. On the downside, a reversal and a resumption of weakness, would refocus attention on 109-08, the Apr 11 low and the bear trigger. First key support to watch is 110-16+, the Apr 22 low.   

SOFR FUTURES CLOSE

Jun 25 +0.010 at 95.915
Sep 25 +0.045 at 96.365
Dec 25 +0.060 at 96.705
Mar 26 +0.050 at 96.915
Red Pack (Jun 26-Mar 27) +0.055 to +0.065
Green Pack (Jun 27-Mar 28) +0.065 to +0.070
Blue Pack (Jun 28-Mar 29) +0.045 to +0.060
Gold Pack (Jun 29-Mar 30) +0.025 to +0.040

REFERENCE RATES (PRIOR SESSION)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.36% (+0.00), volume: $2.623T
• Broad General Collateral Rate (BGCR): 4.35% (+0.00), volume: $1.059T
• Tri-Party General Collateral Rate (TCR): 4.35% (+0.00), volume: $1.018T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $104B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $273B

FED Reverse Repo Operation

RRP usage jumps to $250.601B this afternoon from $157.537B yesterday. So far this year, 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 climbs to 54 from 37 yesterday.

MNI PIPELINE: Corporate Bond Update: $3.25B BNP Paribas 3Pt Launched

• Date $MM Issuer (Priced *, Launch #)
• 04/30 $3.25B #BNP Paribas $1.6B 4NC3 +120, $400M 4NC3 SOFR+143, $1.25B 6NC5 +135
• 04/30 $2.5B Bahrain $750M 12Y 7.5%, $1.75B 8Y Sukuk 6.25%
• 04/30 $2B *IADB 5Y SOFR+44
• 04/30 $1.25B *Nordic Investment Bank 5Y SOFR+43
• 04/30 $1B *CoE Dev Bank 3Y SOFR+36
• 04/30 $850M *Uzbekneftgaz 5Y 8.75%

MNI BONDS: EGBs-GILTS CASH CLOSE: Bellies Outperform

European yields fell on a data-heavy Wednesday.

• After some initial overnight weakness, Bunds and Gilts largely looked through higher-than-expected Q1 Eurozone GDP and French and German state-level flash inflation.
• Core instruments would strengthen through the European morning session on weaker equities and oil prices which helped support global FI generally.
• Stronger-than-expected (or at least, less-weak-than-expected) US GDP and PCE inflation data saw core FI pull back sharply, but Bunds and Gilts would rally anew as equities tumbled on US growth fears.
• The German and UK curves leaned bull steeper on the day, with outperformance in the bellies. Periphery EGB spreads widened modestly, with GGBs underperforming.
• Following today's inflation releases, April Eurozone core HICP (Friday) is seen as having upside risks vs the 2.5% Y/Y estimate coming into the week.
• Thursday is a holiday (Labor Day) throughout much of Europe, though in the UK we get consumer credit / money supply / mortgage data, as well as final April Manufacturing PMI.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 5bps at 1.686%, 5-Yr is down 5.9bps at 1.985%, 10-Yr is down 5.3bps at 2.444%, and 30-Yr is down 4.5bps at 2.882%.
• UK: The 2-Yr yield is down 4bps at 3.803%, 5-Yr is down 4.1bps at 3.917%, 10-Yr is down 3.9bps at 4.441%, and 30-Yr is down 3.7bps at 5.207%.
• Italian BTP spread up 1bps at 112bps / Greek up 1.3bps at 85.5bps

MNI FOREX: Dollar Index Holds Narrow Range Following US Data

• The USD index is moderately firmer Wednesday following the plethora of data releases from the US. Slightly softer Q1 US GDP and Chicago PMI prints were countered by higher PCE, which continue to stoke stagflationary concerns for the US economy. However, the data providing a stale picture, month-end flow dynamics and the close proximity to the employment report on Friday have kept overall FX ranges contained.
• Weaker sentiment was greater reflected by the slippage for major equity benchmarks, which has translated into a 0.2% uptick for the DXY to 99.45. The index continues to consolidate below the 100 mark as the underlying bearish USD trend remains intact at this juncture.
• GBP stands out as the weakest performer across G10. The Friday/Monday daily candles for GBP/USD form a tweezer top - the first real bearish candle pattern on the daily chart since January. A further slide in the pair sees first support into 1.3280, ahead of the 20-day EMA at 1.3202.
• Elsewhere, broad EUR weakness played out in the aftermath of month-end, prompting EURUSD to press fresh weekly lows below 1.1330. While the recent pullback in EURUSD is considered corrective and the bullish trend structure is unchanged for now, the pair’s ability to gain traction above 1.14 this week appears a relatively bearish development at the margin.
• A break of the April 23 low at 1.1308 would focus the market on key support at the 20-day EMA (1.1251), of which a break would signal scope for a deeper corrective pullback towards 1.1144 initially.
• Weaker equity sentiment countered higher-than-expected CPI figures in Australia. Notably, AUDUSD has traded either side of the 0.6400 handle for eight consecutive trading sessions, with bullish trend conditions still in play, but the pair unable to build any lasting momentum above the February highs around 0.6410.
• Thursday focus turns to the Bank of Japan decision before US ISM Manufacturing PMI. Liquidity may be negatively impacted as a number of nations will be off for the Labour Day holiday. 

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
01/05/2025	0630/0830	**	CH	Retail Sales
01/05/2025	0830/0930	**	GB	BOE Lending to Individuals
01/05/2025	0830/0930	**	GB	BOE M4
01/05/2025	0830/0930	**	GB	S&P Global Manufacturing PMI (Final)
01/05/2025	-	***	US	Domestic-Made Vehicle Sales
01/05/2025	1230/0830	***	US	Jobless Claims
01/05/2025	1230/0830	**	US	WASDE Weekly Import/Export
01/05/2025	1345/0945	***	US	S&P Global Manufacturing Index (final)
01/05/2025	1400/1000	***	US	ISM Manufacturing Index
01/05/2025	1400/1000	*	US	Construction Spending
01/05/2025	1430/1030	**	US	Natural Gas Stocks
01/05/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
01/05/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
02/05/2025	0130/1130	*	AU	Producer price index q/q
02/05/2025	0130/1130	***	AU	Retail trade quarterly
02/05/2025	0130/1130	**	AU	Retail Trade