MNI ASIA OPEN: Tsy Yields Decline Ahead Midweek FOMC

EXECUTIVE SUMMARY

• MNI US DATA: KC Fed Services Shows Sharp Activity Decline
• MNI FED WATCH: Rates On Hold As Possible Fall Cut Considered
• MNI JAPAN: Ishiba Opponents Secure Required Signatures To Convene LDP Meeting
• MNI TARIFFS: ROK Officials To Meet w/USTR Greer As They Push For Trade Deal
• MNI UK: Starmer Expected To Press Trump On Steel Tariffs During Scotland Visit
• MNI US DATA: Slowing Momentum In Core Durables Orders Points To Softer Investment

US

MNI FED WATCH: Rates On Hold As Possible Fall Cut Considered

The Federal Reserve is expected to keep its benchmark overnight interest rate in the 4.25%-4.5% target range Wednesday as policymakers continue to inspect U.S. data for tariff pressures on prices, hiring and economic activity. Their outlook and remarks will likely remain little changed from that of the June FOMC meeting, when one group signaled a desire to cut twice this year and another to wait until next year. 

NEWS

MNI JAPAN: Ishiba Opponents Secure Required Signatures To Convene LDP Meeting

Jiji Press reports that opponents of Prime Minister Shigeru Ishiba have secured the requisite signatures from "one-third of the Diet members" to convene a joint meeting of upper and lower house lawmakers from the governing conservative Liberal Democratic Party (LDP). Opposition to Ishiba from within the LDP has reached a near-breaking point after the governing coalition lost its majority in the upper chamber of the Diet in the 20 July House of Councillors election. The meeting will take place on Monday, 28 July.

MNI TARIFFS: ROK Officials To Meet w/USTR Greer As They Push For Trade Deal

South Korea’s top trade negotiators will meet with USTR Jamieson Greer today, as they push to secure a trade deal to avert a 25% tariff rate on August 1, per Reuters. Comes after the cancellation of yesterday's high-profile '2+2' finance and trade meeting with Treasury Secretary Scott Bessent. South Korea’s presidential office said that US Commerce Secretary Howard Lutnick “showed interest” in a “mutually beneficial plan” proposed by Seoul yesterday, per Yonhap.

MNI UK: Starmer Expected To Press Trump On Steel Tariffs During Scotland Visit

US President Donald Trump begins a multi-day visit to Scotland today (25 July), in a visit that is expected to be relatively low-key in comparison to Trump's other foreign trips. Prime Minister Sir Keir Starmer is set to meet with Trump on Monday, 28 July, with reports suggesting that while the September state visit will be the primary opportunity for detailed negotiations on bilateral issues, Starmer may look to press the US president on the issue of steel tariffs. 

MNI MIDEAST: Gaza Ceasefire Talk To Resume Next Week - Al Qahera

Reuters reports, per sources cited by Egypt's Al Qahera News that, “Gaza ceasefire talks are expected to resume next week following Israel's review of Hamas’ response.” The report comes after talks in Qatar appeared to stall yesterday following a decision by Israel and the US to recall negotiators, citing a “lack of desire” on behalf of Hamas to reach a cease-fire.

US TSYS

MNI US TSYS: Risk Sentiment Improves Over Early Trade Headlines

• Treasuries look to finish near late session highs (curve reverse early steepening to mildly flatter) after a lower open, risk sentiment gained after early trade related headlines ("nearing deal with China", "50/50" chance of deal with EU).
• Little initial reaction in Tsys after mixed data (Durable orders slightly better than expected), Cap orders lower than expected w/ prior up-revised. June's advance durable goods report showed renewed weakness in core orders to end Q2, a potential sign of softer business investment and manufacturing in the months ahead.
• The Kansas City Fed's Tenth District Services survey showed a sharp drop in the composite index in July to -5 from positive 3 prior, marking a 19-month low. This was in contrast to the previously released KC regional manufacturing survey which showed an unexpectedly strong improvement.
• Tsy Sep'25 10Y contract trades +5 at 110-31.5 (111-00.5 high). Initial technical resistance at 111-14.5 (Jul 22 high), a clear break of it would highlight a stronger reversal and open 111-28, the Jul 3 high. Key support remains intact at 110-08+, the Jul 14 and 16 low. A move through this support would reinstate a bearish theme. Curves bull flatten: 2s10s -.831 at 46.704, 5s30s -0.077 at 97.326.
• Cross asset: Bbg US$ index off early highs: BBDXY +3.35 at 1198.55; stocks extending record highs (SPX eminis at 6431.0); gold down -29.02.52 at 3339.66. 

OVERNIGHT DATA

MNI US DATA: Slowing Momentum In Core Durables Orders Points To Softer Investment

June's advance durable goods report showed renewed weakness in core orders to end Q2, a potential sign of softer business investment and manufacturing in the months ahead. Once again, the headline durable goods orders reading showed extreme volatility, falling 9.3% M/M after rising 16.5% in May (upwardly revised by 0.1pp), due to nondefense aircraft orders contracting by 52% after a 232% rise.

• While that beat consensus (expected -10.7%), the report overall was weak due to core orders (nondefense ex-aircraft) unexpectedly contracting: -0.7% M/M (0.1% consensus, albeit the contraction came from a higher base as May orders growth was revised up 0.3pp to 2.0%).

MNI US DATA: KC Fed Services Shows Sharp Activity Decline

The Kansas City Fed's Tenth District Services survey showed a sharp drop in the composite index in July to -5 from positive 3 prior, marking a 19-month low. This was in contrast to the previously released KC regional manufacturing survey which showed an unexpectedly strong improvement.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA up 221.09 points (0.49%) at 44916.7
S&P E-Mini Future up 27 points (0.42%) at 6428.25
Nasdaq up 72.7 points (0.3%) at 21129.55
US 10-Yr yield is down 1.4 bps at 4.3819%
US Sep 10-Yr futures are up 5.5/32 at 111-0
EURUSD down 0.0002 (-0.02%) at 1.1746
USDJPY up 0.56 (0.38%) at 147.57
WTI Crude Oil (front-month) down $0.89 (-1.35%) at $65.14
Gold is down $28.93 (-0.86%) at $3339.82

European bourses closing levels:
EuroStoxx 50 down 3.04 points (-0.06%) at 5352.16
FTSE 100 down 18.06 points (-0.2%) at 9120.31
German DAX down 78.43 points (-0.32%) at 24217.5
French CAC 40 up 16.3 points (0.21%) at 7834.58

US TREASURY FUTURES CLOSE

3M10Y -1.031, 2.811 (L: 2.329 / H: 7.717)
2Y10Y -0.817, 46.718 (L: 46.278 / H: 50.32)
2Y30Y -0.759, 100.878 (L: 100.444 / H: 105.391)
5Y30Y +0.1, 97.503 (L: 96.501 / H: 99.712)
Current futures levels:
Sep 2-Yr futures up 0.625/32 at 103-19 (L: 103-17.87 / H: 103-19.25)
Sep 5-Yr futures up 3.5/32 at 108-8.25 (L: 108-02.75 / H: 108-08.5)
Sep 10-Yr futures up 5.5/32 at 111-0 (L: 110-22.5 / H: 111-00.5)
Sep 30-Yr futures up 12/32 at 113-21 (L: 112-30 / H: 113-23)
Sep Ultra futures up 15/32 at 116-15 (L: 115-15 / H: 116-16)

MNI US 10YR FUTURE TECHS: (U5) Monitoring Support

• RES 4: 112-15   61.8% retracement of the Apr 7 - 11 sell-off
• RES 3: 112-12+ High Jul 1 and a bull trigger
• RES 2: 111-28   High Jul 3
• RES 1: 111-14+ High Jul 22
• PRICE:‌‌ 110-24+ @ 11:00 BST Jul 25
• SUP 1: 110-19+/08+ Low Jul 24 / Low Jul 14 & 16      
• SUP 2: 110-03   76.4% retracement of the May 22 - Jul 1 bull leg
• SUP 3: 109-28   Low Jun 6 and 11
• SUP 4: 109.25   Low May 27

Treasury futures are trading closer to their most recent lows having pulled back from Tuesday’s high. Recent gains resulted in a break of the 20-day EMA, strengthening the recovery. Note too that resistance at 111-13+, Jul 10 high, has been pierced. A clear break of it would highlight a stronger reversal and open 111-28, the Jul 3 high. Key support to watch is 110-08+, the Jul 14 and 16 low. Clearance of this level would reinstate a bearish theme.  

SOFR FUTURES CLOSE

Sep 25 +0.015 at 95.840
Dec 25 +0.020 at 96.080
Mar 26 +0.010 at 96.30
Jun 26 steady00 at 96.520
Red Pack (Sep 26-Jun 27) steadysteady0 to +0.015
Green Pack (Sep 27-Jun 28) +0.015 to +0.025
Blue Pack (Sep 28-Jun 29) +0.025 to +0.030
Gold Pack (Sep 29-Jun 30) +0.030 to +0.030

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

• Secured Overnight Financing Rate (SOFR): 4.30% (+0.02), volume: $2.725T
• Broad General Collateral Rate (BGCR): 4.29% (+0.02), volume: $1.128T
• Tri-Party General Collateral Rate (TCR): 4.29% (+0.02), volume: $1.108T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $109B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $281B

FED Reverse Repo Operation

RRP usage rebounds to $150.509B this afternoon from $132.186B yesterday, total number of counterparties at 24. Usage had fallen to $54.772B on Wednesday, April 16 -- lowest level since April 2021 - compares to July 1: $460.731B highest usage since December 31.

MNI BONDS: EGBs-GILTS CASH CLOSE: Partial Recovery From Weak Start

European core FI partially recovered from a weak start Friday.

• EGBs and Gilts weakened from the start, on follow-through from Thursday's hawkish-leaning ECB communications and a hawkish BOJ sources piece overnight (pointing to potential for another rate hike in Japan this year).
• Pressure began to ease thereafter though, with Bunds in particular rallying steadily throughout the session.
• Attention was on multiple encouraging EU-US trade headlines throughout the day, punctuated after the cash close by EU's von der Leyen saying that she would discuss trade with President Trump on Sunday.
• UK retail sales were softer-than-expected, adding to evidence of increasing consumer caution. German July IFO survey was slightly weaker-than-expected, while French and Italian consumer confidence improved.
• On the day, German yields shifted slightly higher in parallel across the curve, while the UK saw twist flattening. For the week, the UK curve bull flattened (2Y -1.8bp, 10Y -3.9bp), with Germany's bear flattening (2Y +7.8bp, 10Y +2.3bp).
• Periphery/semi-core EGB spreads tightened, led by Greece and Italy.
• Apart from this weekend's US-EU trade talks, attention next week will be Eurozone data including Q2 Flash GDP and July Flash Inflation.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.6bps at 1.948%, 5-Yr is up 1.7bps at 2.298%, 10-Yr is up 1.6bps at 2.718%, and 30-Yr is up 1.5bps at 3.207%.
• UK: The 2-Yr yield is up 2.2bps at 3.884%, 5-Yr is up 2.6bps at 4.058%, 10-Yr is up 1.3bps at 4.635%, and 30-Yr is down 1.1bps at 5.449%.
• Italian BTP spread down 1.4bps at 83.4bps  / Greek down 1.6bps at 67.9bps

MNI FOREX: EURGBP Highest Since Nov 2023, USD Firms Ahead of Key Data

• The combination of weaker-than-expected UK retail sales data and the disappointing composite and services PMIs yesterday have continued to weigh on GBP. This dynamic has allowed EURGBP (+0.50%) to extend its recent rally following the break above a cluster of daily highs near 0.8700, eventually bridging the gap to key resistance at 0.8738, the Apr 11 high. This places the cross at the highest level since Nov 2023, signalling scope for a move towards 0.8781, the 2.236 projection of the Mar 3 - 11 - 28 price swing.
• A firmer dollar has also seen GBPUSD fall 0.68%, edging back towards the 1.3400 handle as we approach the weekend close. Broad greenback strength might be reflective of President’s Trump relatively more benign stance on Fed Chair Powell late Thursday. Initially, higher treasury yields on Friday had also supported the dollar, which remained immune to the subsequent turn lower for yields late in the session.
• USDJPY has risen 0.5% to trade back toward 148.00 as the cautious yen optimism following the upper house lection dissipates and concerns linger surrounding the short-term future of PM Ishiba. USDJPY has extended its powerful bounce off the 50-day EMA, rising over 200 pips from Thursday’s session low.
• EURJPY has also printed fresh 12-month highs in the process. Today’s move above 173.43 provides another bullish technical development for EURJPY, and a close at current levels would cement a ninth consecutive week of gains, the longest winning streak since 2008.  Above here, 174.86 (Fib projection) provides the next target before 175.43, the July 11 ‘24 high and a key medium-term resistance
• Next week’s central bank calendar is stacked, with decisions from the Fed, BOC and the BOJ all scheduled. US Q2 advance GDP and July employment are data highlights.

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
28/07/2025	1000/1100	**	GB	CBI Distributive Trades
28/07/2025	1400/1000	**	US	housing vacancies
28/07/2025	1430/1030	**	US	Dallas Fed manufacturing survey
28/07/2025	1530/1130	*	US	US Treasury Auction Result for 2 Year Note
28/07/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
28/07/2025	1700/1300	*	US	US Treasury Auction Result for 5 Year Note
28/07/2025	1700/1300	*	US	US Treasury Auction Result for 13 Week Bill
28/07/2025	-		US	FOMC Meeting
29/07/2025	2301/0001	*	GB	BRC Monthly Shop Price Index