MNI ASIA OPEN: Tsys Retreat, Tariff Pass-Through Inflation

Jul-15 19:35By: Bill Sokolis

APAC+ 3

EXECUTIVE SUMMARY

MNI FED: Boston's Collins: Tariffs To Move Economy Away From Favorable Conditions
MNI US: Thune Downplays Trump's Rescissions Package Ahead Of Senate Voting
MNI US DATA: Core Services Keep June Inflation On The Cool Side
MNI US DATA: CPI Core Services Ex-Housing ("Supercore") - June
MNI US DATA: Core Goods Pickup Unusually Driven By Ex-Vehicles In Tariff Sign

MNI FED: Boston's Collins: Tariffs To Move Economy Away From Favorable Conditions

Boston Fed President Collins (2025 voter) reiterated in a speech Tuesday that she advocates an "actively patient" approach to policymaking. Speech text here. Note that she'd already implied in a previous appearance that she was one of two FOMC participants to only pencil in 1 cut in 2025, putting her slightly on the hawkish side of the median (recall 10 of 19 participants in June saw 2 or more cuts).

Collins writes: "In my view, the economy continues to be in a good place overall, close to the Congressionally mandated objectives of price stability and full employment. However, going forward, I expect to see some upward pressures on inflation, as well as some downward pressures on employment and economic growth."

NEWS

MNI US: Thune Downplays Trump's Rescissions Package Ahead Of Senate Voting

Senate Majority Leader John Thune (R-SD) has downplayed the broader implications of President Donald Trump's USD$9.4 billion rescissions package ahead of the first Senate votes on a request that has threatened to derail government funding negotiations. The first procedural vote could take place as soon as this evening, if Thune can get a handful of wavering Republicans onside.

MNI US-RUSSIA: FT-Trump Indicates Support For Ukrainian Strikes On Moscow

The FT reports that US President Donald Trump privately encouraged Ukrainian President Volodymyr Zelenskyy to strike Moscow if possible in a phone call on 4 July, according to people briefed on discussions. FT reports that in the call, Trump asked, “Volodymyr, can you hit Moscow? . . . Can you hit St Petersburg too?” Trump asked on the call, according to the people. They said Zelenskyy replied: “Absolutely. We can if you give us the weapons.”

MNI RUSSIA: Kremlin Assesses Trump's Announcement, Dismisses FT Report As "Fake"

State-run TASS reports comments from Russian Deputy Foreign Minister Sergei Ryabkov regarding US President Donald Trump's announcement that he will (indirectly) send 'top of the line' weaponry to Ukraine and his threat of '100%' and secondary tariffs on Russia if Moscow does not return to the negotiating table within 50 days.

MNI EU-RUSSIA: Foreign Ministers Look To Sign-Off On 18th Sanctions Package

Foreign ministers from across the EU are meeting in Brussels as they aim to sign off on the 18th package of sanctions against Russia, which is set to include a lower dynamic oil price cap. The process has been held up for some time due to objections from Slovakia. Bratislava's objections have not specifically been about this sanctions package, but regarding the EU's efforts to impose a phase-out of all Russian hydrocarbons.

US TSYS

MNI US TSY FUTURES: Testing Support, Focus on June PPI Inflation Data

Treasury futures are extending lows in the last few minutes, Sep'25 10Y futures -15.5 at 110-09, through support at 110-10.5 (Low Jun 16). Next level to watch: 110-03 (76.4% retracement of the May 22 - Jul 1 bull leg).
Futures have been holding to a lower, narrow band since midmorning - better than average volumes (TYU5 over 1.66M) sees a modest pick up in selling in the last hour. Curves flatter, but well off early lows: 2s10s -.687 at 52.452 (46.396 low), 5s30s -2.342 at 96.329 (64.760 low).
Futures had rejected the initial post-CPI rally (TYU5 110-30 high) as markets woke up to the fact there were clear signs that tariffs are starting to show up in the core goods data. Higher than expected Empire Mfg contributed to the sell-off at the margins.
Cross asset roundup: Bbg US$ index near highs (BBDXY +5.55 at 1208.05) after broader increase in core goods across 56 items for a second month, with a median increase of 0.44% M/M in June is another marked acceleration, threatening to delay the Fed hitting their inflation target.
Stocks near steady (SPX eminis) to mixed, the Nasdaq outperforming (+147.0 at 20787), buoyed by chip makers after Nvidia green-lighted for exports to China. Gold weaker (-14.32 at 3329.19), crude lower (WTI -0.52 at 66.46).
Look ahead: June PPI data tomorrow morning followed by several Fed speakers before the Late Friday's policy Blackout starts.

OVERNIGHT DATA

MNI US DATA: Core Services Keep June Inflation On The Cool Side

The softer-than-expected core reading in June (0.23% M/M vs 0.29% MNI median, 0.13% prior) comes with higher core goods prices than expected (0.20% M/M vs 0.19% MNI median, -0.04% prior), but that's outweighed by core services slightly on the light side (0.25% M/M vs 0.27% MNI median, 0.17% prior).

First on services. As noted, supercore was overall on the soft side at 0.21% (0.24% MNI median, 0.06% prior): lodging prices were significantly softer than expected (-2.9% vs -0.3% median, -0.1% prior), with auto insurance also on the soft side (0.1% vs 0.7% median, 0.7% prior). Airfares were higher than expected (-0.1% vs 0.5% median, -2.7% prior) but this isn't included in PCE; recreation services ticked up to +0.2% M/M from -0.1% (no consensus).
OER was largely in line (0.30% vs 0.29% median, 0.27% prior), but rents picked up less than expected (0.21% vs 0.26% median).

MNI US DATA: CPI Core Services Ex-Housing ("Supercore") - June

Supercore reasonably close to average analyst estimates despite a surprisingly heavy drag from lodging away from home (-2.9% M/M). See the above table for how this lodging line stands out vs expectations.

Core services excl OER & primary rents ('supercore'): 0.212% M/M after 0.061%. Latest 3mth av of 0.161%
Core services excl all shelter (i.e. also stripping out lodging): 0.361% M/M after 0.056%. Latest 3mth av of 0.189%. Limited analyst estimates for ex OER & rents had averaged 0.23% M/M, ranging from 0.10 to 0.32

MNI US DATA: Core Goods Pickup Unusually Driven By Ex-Vehicles In Tariff Sign

The 0.1pp pickup in core CPI M/M to 0.23% from 0.13% was basically equally split between core goods and services: note that vehicle price inflation didn't really make much of a sequential contribution difference (subtracting around 0.02pp to core CPI each, with used -0.7% after -0.5% and new -0.3% for a 2nd month). The standout was "other goods", ie ex-vehicle goods, raising their contribution to 0.09pp from 0.02pp prior. See table below though also note slight differences in aggregates due to rounding.

MNI US DATA: A Wide Range Of CPI Core Goods Items See M/M Acceleration In June

Core goods inflation of 0.20% M/M was close to expectations in June (average of 0.18% M/M across seven analyst estimates) after -0.04% M/M in May and 0.06% in April. It came despite a slightly larger than expected decline in used car prices (-0.67% M/M vs median estimate of -0.50% or mean of -0.15%) along with new cars also falling -0.3% M/M.

MNI US DATA: Redbook Continues To Point To Solid Retail Sales At Start Of Q3

The Johnson Redbook Retail Sales Index has picked up in July where it left off in June, rising 5.2% Y/Y in the week ending July 12 (marking 5.2% Y/Y for the month-to-date given the June retail month ended July 5). That's on the light side vs retailers' revised target of a 5.7% gain, but keeps sales roughly steady at above 5% on a Y/Y nominal clip, suggesting a solid start to the month for broader retail sales.

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 359.08 points (-0.81%) at 44099.18
S&P E-Mini Future down 15.25 points (-0.24%) at 6295.5
Nasdaq up 73.8 points (0.4%) at 20713.87
US 10-Yr yield is up 5.2 bps at 4.4853%
US Sep 10-Yr futures are down 14.5/32 at 110-10
EURUSD down 0.0064 (-0.55%) at 1.16
USDJPY up 1.17 (0.79%) at 148.89
WTI Crude Oil (front-month) down $0.29 (-0.43%) at $66.68
Gold is down $16.45 (-0.49%) at $3327.05

European bourses closing levels:
EuroStoxx 50 down 16.68 points (-0.31%) at 5354.17
FTSE 100 down 59.74 points (-0.66%) at 8938.32
German DAX down 100.35 points (-0.42%) at 24060.29
French CAC 40 down 41.96 points (-0.54%) at 7766.21

US TREASURY FUTURES CLOSE

3M10Y +4.634, 13.931 (L: 3.972 / H: 14.332)
2Y10Y -0.057, 53.082 (L: 46.396 / H: 53.348)
2Y30Y -1.404, 106.112 (L: 101.569 / H: 108.036)
5Y30Y -1.957, 96.714 (L: 94.76 / H: 99.51)
Current futures levels:
Sep 2-Yr futures down 3.625/32 at 103-17 (L: 103-16.5 / H: 103-21.375)
Sep 5-Yr futures down 9.25/32 at 107-27.25 (L: 107-26.5 / H: 108-07.5)
Sep 10-Yr futures down 14.5/32 at 110-10 (L: 110-08.5 / H: 110-30)
Sep 30-Yr futures down 24/32 at 112-0 (L: 111-30 / H: 113-10)
Sep Ultra futures down 26/32 at 114-24 (L: 114-21 / H: 116-22)

MNI US 10YR FUTURE TECHS: (U5) Breaches 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: 111-13+/111-28 High Jul 10 / High Jul 3
RES 1: 111-04 20-day
PRICE:‌‌ 110-16 @ 15:10 BST Jul 15
SUP 1: 110-15 Intraday low
SUP 2: 110-10+ Low Jun 16
SUP 3: 110-03 76.4% retracement of the May 22 - Jul 1 bull leg
SUP 4: 109-28 Low Jun 6 and 11

Treasury futures are trading lower today. The contract has pierced an important short-term support at 110-17, 61.8% of the May 22 - Jul 1 bull leg. Note that price has also traded through a short-trendline support at 110-22. The line is drawn from the May 22 low. This strengthens a bearish theme and a continuation would open 110-03, the 76.4% retracement point. Resistance to watch is at 111-13+, Jul 10 high.

SOFR FUTURES CLOSE

Sep 25 -0.030 at 95.820
Dec 25 -0.060 at 96.080
Mar 26 -0.075 at 96.310
Jun 26 -0.075 at 96.525
Red Pack (Sep 26-Jun 27) -0.065 to -0.055
Green Pack (Sep 27-Jun 28) -0.06 to -0.06
Blue Pack (Sep 28-Jun 29) -0.07 to -0.065
Gold Pack (Sep 29-Jun 30) -0.07 to -0.07

US TSYS: Repo Reference Rates

Secured Overnight Financing Rate (SOFR): 4.33% (+0.02), volume: $2.759T
Broad General Collateral Rate (BGCR): 4.32% (+0.02), volume: $1.125T
Tri-Party General Collateral Rate (TCR): 4.32% (+0.02), volume: $1.094T
(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: $261B

US TSYS: Repo Reference Rates
Secured Overnight Financing Rate (SOFR): 4.33% (+0.02), volume: $2.759T
Broad General Collateral Rate (BGCR): 4.32% (+0.02), volume: $1.125T
Tri-Party General Collateral Rate (TCR): 4.32% (+0.02), volume: $1.094T
(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: $261B

FED Reverse Repo Operation

RRP usage retreats to $198.277B this afternoon from $217.841B yesterday, total number of counterparties at 36. Usage had fallen to $54.772B on Wednesday, April 16 -- lowest level since April 2021 - compares to yesterday's (July 1) $460.731B highest usage since December 31.

MNI PIPELINE: Late Corporate Bond Roundup

Date $MM Issuer (Priced *, Launch #)
07/15 $1.5B *Univision Communications 7NC3 9.375% (upsized from $1B)
07/15 $1B *Conagra $500M 5Y +102, $500M 10Y +127
07/15 $1B Aecom 8NC3
Expected this week:
07/15 $500M Boots Group 7NC3 (includes GBP & EUR issuance)
07/?? $1.5B Kioxia Holdings 5NC2, 8NC3

MNI BONDS: EGBs-GILTS CASH CLOSE: Early Rally Reverses After US CPI

Bunds outperformed Gilts Tuesday as a rally in the first half of the session reversed.

Core FI saw solid gains through the morning, with 10Y Bund yields erasing most of the previous three sessions' rise, and Gilt yields touching the lowest intraday levels in 6 sessions.
There was no major catalyst for the move, which looked through stronger-than-expected German ZEW and Eurozone industrial production data.
The initial read of US CPI data extended the rally as core came in softer than expected, but global FI sold off about an hour later as it became clear that the report indicated rising tariff-related goods price pressures, pushing up breakeven inflation expectations.
The German curve twist flattened, with the UK's leaning bear steeper. Periphery/semi-core EGB spreads were little changed on the day. PM Bayrou's 2026 budget announcement didn't bring any major moves in OAT spreads vs Bund.
After hours we hear from BOE's Bailey and Chancellor Reeves at the Mansion House event.
Wednesday's calendar highlight is UK CPI - MNI's preview is here (including our outlook for Thursday's labour market report). For CPI, we are watching headline closely and the biggest risk to this month’s print seems to be food inflation continuing to surprise to the upside.

Closing Yields / 10-Yr EGB Spreads To Germany

Germany: The 2-Yr yield is up 1.1bps at 1.887%, 5-Yr is down 1.5bps at 2.263%, 10-Yr is down 1.7bps at 2.712%, and 30-Yr is down 1.9bps at 3.226%.
UK: The 2-Yr yield is up 2.4bps at 3.836%, 5-Yr is up 1.6bps at 4.031%, 10-Yr is up 2.5bps at 4.625%, and 30-Yr is up 2.8bps at 5.458%.
Italian BTP spread down 0.3bps at 86bps / French OAT down 0.4bps at 70bps

MNI FOREX: USDJPY Leads Impressive Greenback Rally Following US Inflation Data

Despite the initial dip lower for the greenback following the softer-than-expected core and supercore readings for US inflation, a deeper dive into the data prompted a swift and significant recovery for the greenback. A broader increase in core goods across 56 items for a second month, with a median increase of 0.44% M/M in June is another marked acceleration, threatening to delay the Fed hitting their inflation target.
With US yields rising in reflection of this dynamic, the broad dollar reversal higher was swift and then persistent throughout the session. The most recent USD index recovery has now extended to around 2.3% from cycle lows printed on July 01. The rally marks the cleanest evidence yet of a material break of the downtrend posted off the February high, bolstered by a breach of the 20-day EMA.
The rally has been led by a powerful 0.75% advance for USDJPY, where topside momentum was exacerbated on a break of the June and July highs at 148.03 and 148.65 respectively. The peak so far today stands at 149.02 as the market continues to extend its short squeeze, and the next focus will be on 149.38, the 50.0% retracement of the Jan 10 - Apr 22 bear leg, and 150.49, the Apr 2 high.
While JPY weakness stands out today, the Swedish krona sits at the bottom of the G10 leaderboard. A continued reversal following last week’s inflation data provides an interesting positioning dynamic here, as the market may prefer to be positioned for a dovish Riskbank ahead.
The likes of EUR, AUD and NZD have all declined around 0.4% against the dollar. EURUSD has hit fresh pullback lows towards the 1.16 mark as downside momentum has picked up following a breach of the 20-day EMA.
Although sterling moderately outperforms, GBPUSD has breached important trendline support below 1.3430, drawn from the Jan 13 low. A clear break of the trendline would strengthen a bearish threat and expose 1.3335, the May 20 low. Sentiment will be affected by both CPI and labour market reports, due on Wed and Thu respectively. US PPI is also due.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
16/07/2025	0600/0700	***	GB	Consumer inflation report
16/07/2025	0800/1000	***	IT	HICP (f)
16/07/2025	0900/1100	*	EU	Trade Balance
16/07/2025	1100/0700	**	US	MBA Weekly Applications Index
16/07/2025	1215/0815	**	CA	CMHC Housing Starts
16/07/2025	1230/0830	***	US	PPI
16/07/2025	1315/0915	***	US	Industrial Production
16/07/2025	1315/0915		US	Cleveland Fed's Beth Hammack
16/07/2025	1400/1000		US	Fed Governor Michael Barr
16/07/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
16/07/2025	1800/1400		US	Fed Beige Book
16/07/2025	2230/1830		US	New York Fed's John Williams
17/07/2025	0130/1130	***	AU	Labor Force Survey