MNI ASIA OPEN: Never Too Late to Negotiate Tariffs

EXECUTIVE SUMMARY

• MNI BRIEF: Every BOE Meeting Now "Live", MPC's Taylor Says
• MNI POLITICAL RISK: Trump-Trudeau Call Ended On A "Somewhat" Friendly Manner
• MNI SECURITY: German Gov't Spox-EU Proposals On Defence 'Go In Right Direction'
• MNI US DATA: ADP Misses Along With Recent Downward Revisions
• MNI US DATA: Services PMI Not As Weak As First Feared, But Still Softening
• MNI US DATA: Highest ISM Services Employment In Three Years

US

MNI POLITICAL RISK: Trump-Trudeau Call Ended On A "Somewhat" Friendly Manner

US President Trump offers his take of today's call with Canadian PM Trudeau, saying it ended ended on a "somewhat" friendly manner. The below are taken from Truth Social: 

• "Justin Trudeau, of Canada, called me to ask what could be done about Tariffs. I told him that many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped. He said that it’s gotten better, but I said, “That’s not good enough.”

Wires report Canadian sources as saying discussions will continue today. This follows the one-month delay for auto tariffs announced earlier today, as previously hinted by Lutnick on the grounds that they are USMCA compliant. Auto production is particularly intertwined with US production lines, meaning tariffs there would be particularly damaging for all parties. 

NEWS

MNI BRIEF: Every BOE Meeting Now "Live", MPC's Taylor Says

Bank of England Monetary Policy Committee member Alan Taylor said iWednesday that uncertainty is high, wage data unclear and that the MPC could change policy at any meeting, with rate setters divided over the outlook for policy and what is causing stagnation in output.

MNI US: CANADA: Trudeau Will Reject Unfavourable Compromise On Tariffs - Bloomberg

Bloomberg reporting that Prime Minister Justin Trudeau will not lift retaliatory tariffs on the US unless President Donald Trump removes a 25% tariff imposed on Canadian imports on Tuesday morning. The report comes after comments from Commerce Secretary Howard Lutnick raised optimism that a deal could be struck on partial tariff relief during a call between Trump and Trudeau today. 

MNI UKRAINE: French Spox-Macron, Starmer & Zelenskyy Could Visit US Again Shortly

French gov't spox Sophie Primas has repeated comments about the possibility that President Emmanuel Macron could travel again to Washington, D.C., this time in the company of Ukrainian President Volodymyr Zelenskyy and UK PM Sir Keir Starmer. 

MNI Euronews-Ukraine Aid Back In Draft EUCO Conclusions

Ahead of the special European Council summit taking place on Thursday 6 March, Jorge Liboreiro at Euronews posts on X: "EUCO latest: The Kaja Kallas plan is back in the draft conclusions, after being removed. “The European Council calls on the Council to advance work swiftly on initiatives, notably that of the High Representative, to coordinate increased EU military support to Ukraine"."

MNI SECURITY: German Gov't Spox-EU Proposals On Defence 'Go In Right Direction'

A spokesperson for the German gov't has said that the European Commission's proposals with regard to defence spending "go in the right direction". This comes after two significant announcements from Brussels and Berlin on 4 March with regard to defence and security spending objectives, and how it can be paid for.  

MNI GREECE: Parl't To Debate No Confidence Motion, But Oppo Efforts Doomed To Fail

Four opposition parties have submitted a motion of no confidence in the gov't of PM Kyriakos Mitsotakis, alleging "criminal incompetence" and a lack of progress in the investigation into the Tempi rail tragedy in February 2023 that claimed 57 lives. This is the second confidence motion moved against the gov't in less than a year on the highly emotive topic. 

MNI US TSYS: Tariffs, Never Too Late To Negotiate

• Treasuries look to finish near late session lows after a fairly rocky midweek session initially tied to US data followed by trade related headlines in the second half.
• Treasuries rallied (Jun'25 10Y futures (TYM5) tapped 111-15 high) after lower than expected February ADP job gain - reversed course, declined after higher than expected ISM Services data.
• Risk-off consolidation extended at midday, optimism gained slightly after headlines reported Pres Trump and PM Trudeau were discussing tariffs & US weighing pause on Canada Mexico auto tariffs.
• After the bell, TYM5 futures trade -15 at 110-25 (-24 low), nearly breaching technical support at 110-23/110-00 (Low Feb 28 / High Feb 7). Curves were steeper but well off early highs, 2s10s +2.449 at 27.407 vs. 31.067 high.
• Projected rate cuts through mid-2025 recede from morning levels (*) as follows: Mar'25 at -2.2bp, May'25 at -10.6bp (-12.2bp), Jun'25 at -27bp (-29.2bp), Jul'25 at -36.2bp (-39.8bp).
• Cross asset update: Stocks gained as the early week risk-off tone cooled (SPX eminis +66.00 at 5855.50), Crude weaker but off lows (WTI -1.86 at 66.40), Bbg US$ index near late session lows (BBDXY -12.72 at 1271.86).
• After Thursday's weekly claims trade balance and regional Fed data, focus turns to Friday's headline employment data for February.

OVERNIGHT DATA

MNI US DATA: Highest ISM Services Employment In Three Years

The ISM services index was stronger than expected in Feb at 53.5 as it surprisingly climbed 0.7pts after a -1.2pt drop in Jan. The most notable component was employment, which showed no sign of echoing the service PMI with its first job cuts in three months.

• ISM services: 53.5 (cons 52.5) in February after 52.8 in Jan.
• Employment: 53.9 (cons 51.6, 4 responses) after 52.3 – highest in three years
• Prices paid: 62.6 (cons 60.4, 6 responses vs 58 for the headline index) after 60.4 – highest since Dec and before that Jan 2024.

MNI US DATA: Services PMI Not As Weak As First Feared, But Still Softening

The S&P Global US services PMI saw a solid upward revision to 51.0 in the final February report, although activity still moderated after a solid January and particularly robust readings through May-Dec when it had averaged 54.6. The upcoming ISM services report will be watched to see if there’s a repeat of the job cuts being seen for the first time in three months. 

• S&P Global US Services PMI: 51.0 (cons & flash 49.7) in Feb after 52.9 in Jan
• S&P Global US Composite PMI: 51.6 (cons & flash 50.4) in Feb after 52.7 in Jan - whilst better than first thought, it's the lowest since Apr 2024 and points to a sizeable slowdown in real GDP growth. 

MNI US DATA: ADP Misses Along With Recent Downward Revisions

• ADP employment growth surprised lower in February with 77k (cons 140k).
• It followed a marginally upward revised 186k (initial 183k) in January but some more notable downward revisions before that including 161k in Dec (from 176k), 169k in Nov (from 204k) and 193k in Oct (from 221k).
• See the revisions in the charts below, with jobs growth generally revised higher in 1H24 before lower 2H24.
• As ever though, note the wide differences with private payrolls. In latest vintages for both release, ADP overshot private payrolls by 75k in Jan after undershooting by 112k in Dec and 75k in Nov.
• That important caveat aside, ADP Chief Economist Richardson writes: “Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month. Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.”
• Within the details, small businesses appear to be under pressure, with a 17k decline in jobs for those with 1-19 employees. It’s the first decline since Dec 2023 and by its most since Mar 2022. 

MNI US DATA: Mortgage Refis Sensitive To Limited Declines In Mortgage Rates

• MBA composite mortgage applications jumped 20% last week (sa) to more than reverse a 12% decline over the prior two weeks.
• Refis jumped 37% after a cumulative 11% two-week decline, whilst new purchases increased 9% after a two-week decline of -13.5% (as part of a five-week decline totalling -19%).
• Refis have proven sensitive to declines in lending rates despite the outright level still being high. The 30Y conforming rate fell 15bps to 6.73% for what’s now a 36bp drop since the recent high of 7.09% in January, although is still elevated compared to lows of 6.13% seen in September on then expectations of a more prolonged Fed cutting cycle.
• A reminder of how depressed mortgage activity remains though: new purchases are at 56% of 2019 averages whilst refis are at 45%. 

MNI CANADA DATA: Canada Services PMI Follows Mfg Lower On Tariffs

• The Canada S&P Global services PMI fell from 49.0 to a depressed 46.6 in February, its steepest decline in nearly a year for the lowest level since September.
• It adds to Monday’s manufacturing release sliding from 51.6 in Jn to 47.8 in Feb for its lowest since July.
• The service details are bleak, with stagflationary implications from tariffs including the steepest cut in employment since mid-2020.  Press release highlights (full release here): 

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 472.32 points (1.11%) at 42984.48
S&P E-Mini Future up 60.75 points (1.05%) at 5848.25
Nasdaq up 252.8 points (1.4%) at 18531.81
US 10-Yr yield is up 3.1 bps at 4.2747%
US Jun 10-Yr futures are down 14.5/32 at 110-25.5
EURUSD up 0.0168 (1.58%) at 1.0794
USDJPY down 0.98 (-0.65%) at 148.8
WTI Crude Oil (front-month) down $1.94 (-2.84%) at $66.33
Gold is up $4.53 (0.16%) at $2922.33

European bourses closing levels:
EuroStoxx 50 up 101.81 points (1.89%) at 5489.12
FTSE 100 down 3.16 points (-0.04%) at 8755.84
German DAX up 754.22 points (3.38%) at 23081.03
French CAC 40 up 125.83 points (1.56%) at 8173.75

US TREASURY FUTURES CLOSE

3M10Y +1.025, -4.232 (L: -12.596 / H: -3.467)
2Y10Y +2.656, 27.614 (L: 25.415 / H: 31.067)
2Y30Y +2.452, 56.954 (L: 54.668 / H: 61.825)
5Y30Y +0.502, 49.557 (L: 49.175 / H: 54.526)
Current futures levels:
Jun 2-Yr futures down 2.625/32 at 103-15.25 (L: 103-14.875 / H: 103-21.75)
Jun 5-Yr futures down 10/32 at 107-23.75 (L: 107-23.25 / H: 108-08)
Jun 10-Yr futures down 15/32 at 110-25 (L: 110-24 / H: 111-15)
Jun 30-Yr futures down 26/32 at 117-13 (L: 117-08 / H: 118-14)
Jun Ultra futures down 1-04/32 at 122-31 (L: 122-27 / H: 124-13)

MNI US 10YR FUTURE TECHS: (M5) Overbought But Remains Bullish

• RES 4: 112-23+1.618 proj of the Jan 13 - Feb 7 - Feb 12 price swing
• RES 3: 112-18  2.0% 10-dma envelope
• RES 2: 112-13  1.500 proj of the Jan 13 - Feb 7 - Feb 12 price swing
• RES 1: 112-01/02 High Mar 4 / 1.382 proj of Jan 13-Feb 7-12 swing
• PRICE:‌‌ 111-00 @ 11:10 GMT Mar 5
• SUP 1: 110-23/110-00   Low Feb 28 / High Feb 7       
• SUP 2: 109-21   50-day EMA and a key near-term support
• SUP 3: 108-21   Low Feb 19
• SUP 4: 108-03+ Low Dec 12 and a bear trigger  

Treasury futures traded to a fresh cycle high Tuesday, reinforcing current bullish conditions. The contract has pierced resistance at 111-22+, Dec 3 ‘24 high. A clear break of this level would strengthen a bullish theme and open 112-02 and 112-13, Fibonacci projection points. Note that the daily trend condition is overbought, a pullback would be considered corrective and allow the overbought set-up to unwind. Firm support is at 110-00, the Feb 7 high. 

SOFR FUTURES CLOSE

Mar 25 -0.010 at 95.713
Jun 25 -0.035 at 95.945
Sep 25 -0.025 at 96.190
Dec 25 -0.035 at 96.320
Red Pack (Mar 26-Dec 26) -0.08 to -0.045
Green Pack (Mar 27-Dec 27) -0.10 to -0.09
Blue Pack (Mar 28-Dec 28) -0.10 to -0.095
Gold Pack (Mar 29-Dec 29) -0.095 to -0.085

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

• 1M -0.00009 to 4.31397 (-0.01074/wk)
• 3M -0.01433 to 4.28586 (-0.03092/wk)
• 6M -0.04099 to 4.17565 (-0.08110/wk)
• 12M -0.08382 to 3.97399 (-0.15273/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.33% (+0.00), volume: $2.562T
• Broad General Collateral Rate (BGCR): 4.32% (+0.01), volume: $947B
• Tri-Party General Collateral Rate (TCR): 4.32% (+0.01), volume: $933B
• (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: $288B

FED Reverse Repo Operation

RRP usage inches up to $139.493B this afternoon from $135.257B Tuesday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties falls to 32 from 50 prior.

MNI PIPELINE: Late Corporate Bond Update: Waiting For Mars

Still waiting for the $26B Mars 8pt jumbo to price - eighth largest issuer on record.

• Date $MM Issuer (Priced *, Launch #)
• 03/05 $26B #Mars $2B 2Y +50, $3.25B 3Y +60, $4.5B 5Y +75, $2.75B 7Y +85, $5B 10Y +95, $2.75B 20Y +110, $4.75B 30Y +117, $1B 40Y +127
• 03/05 $1.75B #Axon $1B 5NC2 6.125%, $750M 8NC3 6.25%
• 03/05 $1B *KommuneKredit WNG 5Y SOFR+44
• 03/05 $750M #Republic of Armenia 10Y 7.1%
• 03/05 $500M Acadia Health 8NC3
• 03/05 $500M Forestar Group 8NC3 6.5%
  • Expected Thursday:
  • 03/06 $Benchmark IADB 5Y SFOR+39a

MNI FOREX: EURUSD Rally Gathers Momentum, Approaches 1.0800 Mark

• Both sides of the EURUSD trade continue to work in a bullish direction, with greenback weakness extending throughout Wednesday’s session and the latest German fiscal developments providing a significant boost to the Euro.
• EURUSD has risen 1.5% and sits at session highs as we approach the APAC crossover. Dips for the single currency over the past 24 hours have remained extremely shallow, threatening an even stronger rally as we approach both the ECB meeting and NFP later in the week.
• Euro strength remains broad based, with the EURCHF surge continuing to standout. Following the break of 0.9518, the cross has extended gains to 1.62% on Wednesday, rising above 0.9600 for the first time since July last year. Most recent headlines on a one-month delay for Canada on Autos has done little to move the needle, however, EURCAD continues to rise aggressively. EURCAD is up 1.4% on Wednesday and has risen to a fresh four-year high above 1.55. Resistance remains scant here, signalling scope for a more protracted move to the pandemic induced highs just shy of 1.60.
• Separately, EURGBP has also extended its short-term reversal, rising 0.9%. This cross will be worth monitoring as we approach strong downtrend resistance, intersecting around 0.8430.
• EURAUD appreciation is also gathering significant pace, and today’s 0.6% advance looks set to extend its winning streak to 9 consecutive sessions, and total gains of around 3.85%. The last time we had a longer winning streak was back in December 2012, where EURAUD advanced for 11 sessions in a row and rose 3.36%.
• Uk construction PMI crosses Thursday, before the ECB decision/press conference and US jobless claims data.

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
06/03/2025	0645/0745	**	CH	Unemployment
06/03/2025	0700/0800		SE	Flash CPI
06/03/2025	0830/0930	**	EU	S&P Global Final Eurozone Construction PMI
06/03/2025	0930/0930		GB	Decision Maker Panel data
06/03/2025	0930/0930	**	GB	S&P Global/CIPS Construction PMI
06/03/2025	1000/1100	**	EU	Retail Sales
06/03/2025	1100/0600	***	TR	Turkey Benchmark Rate
06/03/2025	1315/1415	***	EU	ECB Deposit Rate
06/03/2025	1315/1415	***	EU	ECB Main Refi Rate
06/03/2025	1315/1415	***	EU	ECB Marginal Lending Rate
06/03/2025	1330/0830	***	US	Jobless Claims
06/03/2025	1330/0830	**	US	WASDE Weekly Import/Export
06/03/2025	1330/0830	**	CA	International Merchandise Trade (Trade Balance)
06/03/2025	1330/0830	**	CA	International Merchandise Trade (Trade Balance)
06/03/2025	1330/0830	**	US	Trade Balance
06/03/2025	1330/0830	**	US	Non-Farm Productivity (f)
06/03/2025	1345/1445		EU	ECB Press conference post Governing council meeting
06/03/2025	1345/0845		US	Philly Fed's Pat Harker
06/03/2025	1445/1545		EU	Publication of ECB Staff macroeconomic projections
06/03/2025	1500/1000	*	CA	Ivey PMI
06/03/2025	1500/1000	**	US	Wholesale Trade
06/03/2025	1515/1615		EU	ECB Podcast: Lagarde presents latest MonPol decision
06/03/2025	1515/1615		EU	Lagarde video message at Women's Forum event
06/03/2025	1530/1030	**	US	Natural Gas Stocks
06/03/2025	1630/1130	**	US	US Bill 04 Week Treasury Auction Result
06/03/2025	1630/1130	*	US	US Bill 08 Week Treasury Auction Result
06/03/2025	1700/1200		US	Treasury Secretary Scott Bessent
06/03/2025	2030/1530		US	Fed Governor Christopher Waller
06/03/2025	0000/1900		US	Atlanta Fed's Raphael Bostic