MNI ASIA OPEN: Pres Trump Addresses Joint Session of Congress

EXECUTIVE SUMMARY

• MNI FED BRIEF: NY Fed Williams Sees Inflation Uptick From Tariffs
• MNI EU: Commission President Outlines 'ReArm Europe' Plan
• MNI US TSYS: Bonds Reverse Early Gains, Risk Off Consolidation?

US

MNI FED BRIEF: NY Fed Williams Sees Inflation Uptick From Tariffs

New U.S. tariffs will likely push prices higher later this year but also raise concerns about the ongoing strength of business investment and consumer spending, and the Federal Reserve should take its time before making any further cuts to interest rates, New York Fed President John Williams said Tuesday. 

• "I do factor in some effect of tariffs on inflation on prices. I do think we're going to see that later this year," Williams told a Q&A at a Bloomberg Invest event. "We don't know how long the tariffs will apply, we don't know how other countries will respond." Williams said monetary policy is "modestly restrictive" and has the "right balance" right now, allowing the Fed to take its time before deciding any next moves on monetary policy. "I don't see the need to change it right away," he said. 

NEWS

MNI US-RUSSIA: Sanctions Must Be Lifted To Normalise US-Russia Relations - Kremlin

Reuters carrying comments from Kremlin spokesperson Dmitri Peskov, speaking on major developments in the war in Ukraine, including possible sanctions relief and US President Donald Trump's decision to pause military aid to Ukraine. Peskov said it’s “too early to comment” on reports that the Trump administration is looking at possible sanctions relief for Russia but notes that sanctions are “illegal” and need to be lifted in order to normalise relations.

MNI EU: Commission President Outlines 'ReArm Europe' Plan

European Commission President Ursula von der Leyen has outlined the Commission's 'ReArm Europe' plan intended to significantly boost defence and security spending at the EU and member state level. One proposal is to activate the 'national escape clause' of the Stability and Growth Pact that will allow member states to increase domestic defence spending without entering the excessive deficit procedure.

MNI US-CHINA: SCIO Publishes Fentanyl White Paper As US Tariffs Hit

(MNI) London - China's state-run Xinhua reports that the State Council Information Office has released a white paper entitled "China's Control of Fentanyl-Like Substances". Allegations against China of fentanyl production/the production of chemicals used to make the drug have been cited as one of the factors behind the imposition of trade tariffs by the Trump administration. The white paper says that China "fully and deeply participates in important decision-making in the field of international drug control". In response to US pressure, the white paper says China "opposes mutual accusations and shirking of responsibilities"

MNI MIDEAST: Israeli FM Says Open To Phase 2 Talks; Arab League Ldrs Meet On Gaza

Israel's Foreign Minister Gideon Sa'ar says that the Israeli gov't is "ready to continue with phase two of the agreement, but for that we need an agreement. We will not agree to another October 7, from any front." Sa'ar refused to answer questions on if there was a deadline after which the war on Hamas in Gaza will resume, saying only, "If we want to - we will do it." 

MNI US TSYS: Bonds Reverse Early Gains, Risk Off Consolidation?

• Treasuries look to finish mostly lower Tuesday, curves twisting steeper (2s10s +5.578 at 25.717) as Bonds lead reversal off this morning's highs (USM5 tapped 119-18 high, tapped 118-00 after the bell).
• Move partially tied to rebound in stocks off lows during the same period of time, Nasdaq firmly in the green before making a late retreat ahead of the close. Another factor was a retreat in Bunds amid reports officials were proposing a E500B "whatever it takes" defense fund.
• No substantive data Tuesday, "I do factor in some effect of tariffs on inflation on prices. I do think we're going to see that later this year," Williams told a Q&A at a Bloomberg Invest event.
• Focus turns to President Trump addressing the joint session of Congress tonight at 2100ET. Followed by ADP private employ data tomorrow morning at 0815ET.
• Late session chatter that President Trump looks to announce a late term minerals deal with Ukraine after all.

OVERNIGHT DATA

No substantive data released Tuesday, focus on Wednesday morning's ADP private employment data ahead of Friday's key jobs data.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 670.25 points (-1.55%) at 42520.99
S&P E-Mini Future down 67 points (-1.14%) at 5795
Nasdaq down 65 points (-0.4%) at 18285.16
US 10-Yr yield is up 4.7 bps at 4.2023%
US Jun 10-Yr futures are down 2.5/32 at 111-10.5
EURUSD up 0.0124 (1.18%) at 1.0611
USDJPY down 0.44 (-0.29%) at 149.07
WTI Crude Oil (front-month) down $0.05 (-0.07%) at $68.32
Gold is up $25.67 (0.89%) at $2918.38

European bourses closing levels:
EuroStoxx 50 down 153.38 points (-2.77%) at 5387.31
FTSE 100 down 112.31 points (-1.27%) at 8759
German DAX down 820.21 points (-3.54%) at 22326.81
French CAC 40 down 151.79 points (-1.85%) at 8047.92

US TREASURY FUTURES CLOSE

3M10Y +5.715, -9.185 (L: -22.55 / H: -7.802)
2Y10Y +6.401, 26.54 (L: 19.451 / H: 27.19)
2Y30Y +8.236, 57.886 (L: 49.358 / H: 59.371)
5Y30Y +3.952, 52.636 (L: 48.961 / H: 55.722)
Current futures levels:
Jun 2-Yr futures up 2.875/32 at 103-19.25 (L: 103-17.5 / H: 103-25.125)
Jun 5-Yr futures up 1/32 at 108-3.75 (L: 108-00.25 / H: 108-19.25)
Jun 10-Yr futures down 2.5/32 at 111-10.5 (L: 111-05 / H: 112-01) 
Jun 30-Yr futures down 18/32 at 118-08 (L: 118-00 / H: 119-18)
Jun Ultra futures down 1-4/32 at 124-02 (L: 123-23 / H: 126-01)

MNI US 10YR FUTURE TECHS: (M5) Fresh Cycle High

• RES 4: 112-13  1.500 proj of the Jan 13 - Feb 7 - Feb 12 price swing
• RES 3: 112-10   2.0% 10-dma envelope
• RES 2: 112-02  1.382 proj of the Jan 13 - Feb 7 - Feb 12 price swing
• RES 1: 111-28+ Intraday high     
• PRICE:‌‌ 111-08 @ 1445 ET Mar 4
• SUP 1: 110-00   Low Feb 28 / High Feb 7 and recent breakout point       
• SUP 2: 109-19   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 have traded to a fresh short-term cycle high today, reinforcing the current bullish condition. The contract has pierced resistance at 111-22+, the Dec 3 ‘24 high. This paves the way for an extension towards 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 +0.005 at 95.725
Jun 25 +0.030 at 95.995
Sep 25 +0.050 at 96.240
Dec 25 +0.060 at 96.385
Red Pack (Mar 26-Dec 26) +0.045 to +0.070
Green Pack (Mar 27-Dec 27) -0.01 to +0.030
Blue Pack (Mar 28-Dec 28) -0.03 to -0.02
Gold Pack (Mar 29-Dec 29) -0.04 to -0.035

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

• 1M -0.00733 to 4.31406 (-0.01065/wk)
• 3M -0.00952 to 4.30019 (-0.01659/wk)
• 6M -0.01564 to 4.21664 (-0.04011/wk)
• 12M -0.01712 to 4.05781 (-0.06891/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.33% (-0.06), volume: $2.636T
• Broad General Collateral Rate (BGCR): 4.31% (-0.05), volume: $949B
• Tri-Party General Collateral Rate (TCR): 4.31% (-0.05), volume: $930B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $110B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $287B

FED Reverse Repo Operation

RRP usage climbs to $135.257B this afternoon from $119.987B Monday. 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: Corporate Bond Update: Mars Jumbo Issuance Chatter

• Market chatter in credit space is that Mars Inc, a family-owned, global leader in pet care, snacking and food, is looking to issue as much as $30B over as many as 8 tranches in the near term (possibly tomorrow after a conf call with investors today)
• The "jumbo" issuance is expected to help finance it's purchase of Kellanova, also a snacking/food related company for "$83.50 per share in cash, for a total consideration of $35.9B" back in August 2024.
• Estimates vary from $25B to $30B which would put it comfortably in the top ten largest corporate debt issuance on record.
  • Date $MM Issuer (Priced *, Launch #)
  • 03/04 $3B *KFW +3Y SOFR+29
  • 03/04 $2.1B *Meiji Yasuda 30.25NC10.25 6.1%
  • 03/04 $1.1B #3M $550M 5Y +80, $550M 10Y +95
  • 03/04 $500M #First Horizon 6NC5 +153
  • 03/04 $500M *VeriSign +7Y +125
  • 03/04 $500M OneMain Finance 7NC3 investor call
    • Expected Wednesday:
    • 03/05 $1B KommuneKredit WNG 5Y SOFR+47a

MNI BUNDS: Futures Test Key Short-Term Support On Whatever It Takes Defense Moment

• Bund futures have slid in late trading on Merz-Klingbeil comments around submitting a proposal to change the debt brake in Germany next week and setting up to a EUR 500bn special defense fund.
• RXH5 extended the initial slide to have hit fresh lows of 130.93 (latest 131.07).
• It’s easily through 131.79 (Mar 3 low) and also a bear trigger at 131.26 (Feb 19 low), testing the key short-term support at 131.00 (Jan 24 low). After that lies 130.28 (Jan 15 low).
• Bloomberg writes that “Germany will set up a €500 billion ($528 billion) fund as part of a sweeping policy overhaul to tackle urgently needed investments in defense and infrastructure, according to chancellor-in-waiting Friedrich Merz. Merz, speaking to reporters in Berlin Tuesday, also said that spending over 1% of GDP will be exempted from the country’s debt brake.”
• Handelsblatt writes on it more specifically being E500bn for infrastructure spending over a period of 10 years.
• Whilst the magnitude of the infrastructure fund looks in keeping with Reuters reports over the weekend (E400-500bn) and it seems to have no specific mention of a separate defense fund (which Reuters sources had seen at E400bn), - which could argue for some paring of the sharp move – the bearish reaction is likely being sustained by Merz saying "I want to make it very clear: In view of the threats to our freedom and peace on our continent, our defense must now also be based on 'whatever it takes,'" (per a translation from Handelsblatt coverage).

MNI FOREX: Greenback Weakness Extends, USDCHF Slides Below 0.8900

• Tariff considerations have been a primary driver of FX sentiment on Tuesday, with Mexican peso & Canadian dollar weakness persisting across the session. Their depreciation may have been somewhat offset by broader dollar weakness, as the ongoing stagflationary concerns regarding the US economy also gain traction. This has placed the Ice Dollar index at its lowest level since December 09, printing a low of 105.88.
• The DXY break to new yearly lows coincided with several key technical levels giving way across the majors. For EURUSD, spot has broken a cluster of resistance between 1.0525/33 which has been the key focus in recent sessions. The pair was given an additional late boost from Germany’s conservative leader, who provided details on changing the debt brake, prompting EURUSD to extend to ~1.0575. A close at current levels would highlight an important technical break, providing the foundation for a stronger bullish short-term theme, initially opening 1.0630, the Dec 6 high.
• USDJPY also broke below 148.60 support, a level that had been building in significance. Spot traded as low as 148.10 but has bounced back closer to 149.00 ahead of the APAC crossover. Today’s breach does strengthen the current bearish condition and signal scope for a more protracted move lower to 146.95, a Fibonacci retracement.
• USDCHF is down 0.86% on the session, standing out in G10. In recent sessions, both 20- and 50-day exponential moving averages have moved into a bear-mode, signalling scope for further downside. Support levels remain scant, with a 50% Fibonacci retracement point (drawn from 2024 low – 2025 high) at 0.8788, the immediate technical level of note.
• Lower US yields and equities prompted further pressure on AUDJPY, which briefly extended its 3-week slide to 5.6%, reaching a low of 91.86 and narrowing the gap to key support ~90.20. Australian GDP data is due on Wednesday, before Swiss CPI. US ADP and ISM Services PMI are also scheduled.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
05/03/2025	0730/0830	***	CH	CPI
05/03/2025	0745/0845	*	FR	Industrial Production
05/03/2025	0815/0915	**	ES	S&P Global Services PMI (f)
05/03/2025	0815/0915	**	ES	S&P Global Composite PMI (final)
05/03/2025	0845/0945	**	IT	S&P Global Services PMI (f)
05/03/2025	0845/0945	**	IT	S&P Global Composite PMI (final)
05/03/2025	0850/0950	**	FR	S&P Global Services PMI (f)
05/03/2025	0850/0950	**	FR	S&P Global Composite PMI (final)
05/03/2025	0855/0955	**	DE	S&P Global Services PMI (f)
05/03/2025	0855/0955	**	DE	S&P Global Composite PMI (final)
05/03/2025	0900/1000	***	IT	GDP (f)
05/03/2025	0900/1000	**	EU	S&P Global Services PMI (f)
05/03/2025	0900/1000	**	EU	S&P Global Composite PMI (final)
05/03/2025	0930/0930	**	GB	S&P Global Services PMI (Final)
05/03/2025	0930/0930	***	GB	S&P Global/ CIPS UK Final Composite PMI
05/03/2025	1000/1100	**	EU	PPI
05/03/2025	1000/1100	*	IT	Retail Sales
05/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
05/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
05/03/2025	1200/0700	**	US	MBA Weekly Applications Index
05/03/2025	1315/0815	***	US	ADP Employment Report
05/03/2025	1430/1430		GB	TSC: Bailey/Pill/Taylor/Greene
05/03/2025	1430/1430		GB	Greene annual report
05/03/2025	1445/0945	***	US	S&P Global Services Index (final)
05/03/2025	1445/0945	***	US	S&P Global US Final Composite PMI
05/03/2025	1500/1000	***	US	ISM Non-Manufacturing Index
05/03/2025	1500/1000	**	US	Factory New Orders
05/03/2025	1530/1030	**	US	DOE Weekly Crude Oil Stocks
05/03/2025	1900/1400		US	Fed Beige Book
05/03/2025	2315/1815		US	New York Fed's Roberto Perli
06/03/2025	-		EU	European Central Bank Meeting
06/03/2025	0030/1130	*	AU	Building Approvals
06/03/2025	0030/1130	**	AU	Trade Balance