MNI ASIA OPEN: US/China Rare Earth Deal, Soft CPI, ME Tensions

EXECUTIVE SUMMARY

• MNI FED: Trump Admin Reiterates Calls For Rate Cuts After CPI
• MNI SECURITY: US Evacuation of Baghdad Embassy Supportive for Crude
• MNI US: Bessent Says "Rebalancing" Between US And China Is Possible
• MNI US-CHINA: China VP-Two Sides Should Safeguard 'Hard Won Outcome' From Talks
• MNI US DATA: CPI Services Surprise Softer For Both Rents and Supercore
• MNI US DATA: CPI Dispersion Metrics Point To Only Mild Uptick For Core Goods

US

MNI SECURITY: US Evacuation of Baghdad Embassy Supportive for Crude

The US embassy in Baghdad is readying for an evacuation amid rising regional security tensions, likely linked to concerns over failed nuclear talks with Iran, Reuters reported. Iran threatens to target US. bases if nuclear talks fail, heightening fears of military conflict, Reuters said.

MNI FED: Trump Admin Reiterates Calls For Rate Cuts After CPI

Unsurprisingly, the Trump administration has taken to social media calling for Fed rate cuts since the CPI data crossed: President Trump posted the following on Truth Social: “PI JUST OUT. GREAT NUMBERS! FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!”

• Vice President Vance posted the following on X, quoting a post that provided the CPI figures: “The president has been saying this for a while, but it's even more clear: the refusal by the Fed to cut rates is monetary malpractice”.

MNI US: Bessent Says "Rebalancing" Between US And China Is Possible

US Treasury Secretary Scott Bessent said in his opening address: “…Treasury has just completed its most successful tax filing season in years—and we did so while improving efficiencies and cutting costs at the IRS.” Bessent noted that, “April receipts this year were up 9.5% over the previous year. And receipts in May were up 14.7% over the previous year... against the backdrop of one of the most consequential tax proposals ever to come before Congress,” referring to the One Big Beautiful Bill.

NEWS

MNI TARIFFS: New US-China "Deal" Rates Look Like May 12 Figures Maintained

There isn't enough detail in the Trump announcement on social media to determine what the 55% tariff on China refers to. It could be interpreted as: 10% reciprocal tariff + 20% IEEPA tariff, plus the Section 301 tariffs which were pre-existing on some products which went up to 25% for a max 55% rate.

• The May 12 order reduced the 125% reciprocal rate to 10% for 90 days. Now China has 10% on US (per Trump's message), US has 10% on China. In other words there doesn't seem to be much if any of a difference here vs the May 12 agreement as originally announced. Note the de minimis rate on China imports under the May 12 deal went up to 54%, that's not addressed in Trump's message.

MNI US-CHINA: China VP-Two Sides Should Safeguard 'Hard Won Outcome' From Talks

Reuters reporting comments from Chinese Vice Premier He Lifeng, who led China's delegation in the talks with the US that took place in London over 9-10 June. VP says: "China's stance on trade issues with the US is clear and consistent." Says that the "Two sides should enhance consensus, strengthen cooperation, and jointly safeguard the hard-won outcome from the dialogues." He Lifeng: China and US "should maintain communication" and "push for table and long-term China-US trade and economic ties." The VP says "China is sincere in trade and economic consultations, but has its principles."

• The main topic of the talks was not the imposition of tariffs that has dominated the global news and economic cycle for the past two months, but Chinese export controls on rare earth metals that are crucial for US supply chains and US restrictions on the export of semiconductors and other related technologies linked to artificial intelligence (AI) to China.

MNI JAPAN: PM Denies 'Cash Handouts' As Oppo. Seen To Back Off From No Conf. Motion

Speaking as part of the final leaders' debate of the current session of the House of Representatives, PM Shigeru Ishiba counters recent reports about the prospect of cash handouts ahead of the House of Councillors election due by late July. Reuters reports Ishiba saying that it is "not true that the gov't is currently considering providing cash handouts" and that people "should be cautious about any plans that would deteriorate already tattered state finances." 

MNI ISRAEL: Haredi Parties Key To Possible Gov't Ouster; US Spker To Address Knesset

Tzvi Joffre at Unpacked posts on X: "Several meetings are ongoing now in an attempt to prevent the Haredim from voting in favor of dissolving the Knesset and sparking elections. Reportedly, the efforts now are focused on trying to put together a list of principles for a draft law that would satisfy the Haredim and also get approval from the AG and courts." 

US TSYS

MNI US TSYS: Extending Late Session Highs: ME Risk Adds to Soft CPI Support

• Treasuries look to finish near late Wednesday session highs as tensions in the Middle East underscored risk-off support for rates after this morning's soft CPI set the stage for an early rate rally (overlooking this morning's "done deal" US/China rare earth trade negotiation headlines).
• The US embassy in Baghdad is readying for an evacuation amid rising regional security tensions, likely linked to concerns over failed nuclear talks with Iran, Reuters reported. Iran threatens to target US. bases if nuclear talks fail, heightening fears of military conflict, Reuters said.
• Headline inflation came in below-expected at 0.08% M/M (0.20% MNI median) - but this was due entirely to the downside miss in core items: core services excl OER & primary rents ('supercore'): 0.061% M/M after 0.209%. Latest 3mth av of 0.01%; core services excl all shelter: 0.056% M/M after 0.151%. Latest 3mth av of 0.046%.
• Rates extended after decent $39B 10Y note auction re-open stopped .9bp through: drawing 4.421% high yield vs. 4.430% WI; 2.52x bid-to-cover vs. 2.60x prior.
• Focus turns to Thursday's PPI inflation and weekly claims.

OVERNIGHT DATA

MNI US DATA: CPI Dispersion Metrics Point To Only Mild Uptick For Core Goods

Taking a step back, dispersion metrics of CPI inflation saw a mild uptick with 33% of ~190 items in the overall basket growing in excess of 3% Y/Y vs 29% in April. It’s the highest since February and before that May 2024, with the share having bottomed out at 28% in December. For context, it averaged 24% in 2019 or 19% in 2015-19.

• The same analysis for core goods saw the >3% Y/Y share rise from 14% to 19% in May for its highest since Feb and before that Apr 2024. As noted in the details, whilst there were multiple large increases in M/M rates for some specific items, there were also some surprisingly weak readings elsewhere.
• Further, whilst the latest level is above the 12% averaged in 2015-19, it’s only back to the 18.5% seen just in 2019, having peaked at 75% in 2022.
• The share of core services items growing >3% Y/Y largely consolidated an impressive recent drop, only rising 1pp to 51% having been at 63% in February. However, it averaged 38% in 2019 or 34% in 2015-19. 

MNI US DATA: Headline CPI Comes In Soft, But No Thanks To Food And Energy

Headline inflation came in below-expected at 0.08% M/M (0.20% MNI median) - but this was due entirely to the downside miss in core items. Food prices rose 0.29% (-0.08% prior, 0.20% median) with energy down 1.0% M/M (Corrected from earlier bullet) (-1.2% median, 0.7% prior).

• Within food: away from home rose 0.31%, the 4th consecutive increase above 0.3% (and a potential upside driver of core PCE), while food at home saw a rebound to 0.27% after -0.44% in April.

MNI US DATA: CPI Services Surprise Softer For Both Rents and Supercore

Supercore below all six estimates seen beforehand:

• Core services excl OER & primary rents ('supercore'): 0.061% M/M after 0.209%. Latest 3mth av of 0.01%
• Core services excl all shelter: 0.056% M/M after 0.151%. Latest 3mth av of 0.046%
• Limited analyst estimates for ex OER & rents had averaged 0.18% M/M, ranging from 0.09 to 0.26

Rental inflation also below any analyst estimate we'd seen, especially for primary rents. 

• OER: 0.27 vs an average analyst estimate of 0.33% (range 0.28-0.36) in May after 0.36%
• Primary rents: 0.21 vs an average estimate of 0.31% (range 0.29-0.32) in May after 0.34%

MNI US DATA: Widespread Downside Surprises In Core Categories

Driving the lower-than-expected core CPI readings: pretty much every major category, with surprising deflation in core goods prices (-0.54%, led by used and new vehicles and apparel, vs +0.06% in April), with core services also on the soft side at 0.17% (0.29% April) - shelter and airfares the major downside surprises. See table:

MNI US DATA: Mortgage Applications Jump Despite Steady Rates

Weekly MBA mortgage applications jumped 12.5% W/W in the Jun 6 week, fully reversing the 3.9% drop a week earlier. That jump moves the composite index back to levels it hasn't seen since early April, after which rising mortgage rates dampened demand.

• Refis led the way with a 15.6% W/W jump, the first rise since the start of May, to a 4-week high SA level (though still just 40% of 2019 activity). Purchases also jumped though, by 10.3% W/W, reversing the declines of April (though just 66% of 2019 levels). While activity across the board remains weak, it increasingly looks like it has bottomed out.

MNI CANADA DATA: April Building Permits Lowest Since June 2024 On Housing

Building permits fell to lowest since last June, -6.6% in April to CAD11.7B, as multi-family residential units in British Columbia posted declines. Residential permits in April -12% to CAD 7.4B after from a peak of CAD9.1B in Dec 2024. Consumer confidence has been hit by U.S. trade war.  

• Non-residential permits +3.3% to CAD4.3B. They've been more stable than residential this year even amid U.S. tariff threats. Permits rose in April led by Ontario due to growth in industrial and commercial units, but drop in institutional component moderated gains.
• Nominal permits -14% YOY. 

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 8.88 points (-0.02%) at 42857.59
S&P E-Mini Future down 20.5 points (-0.34%) at 6024.75
Nasdaq down 105.2 points (-0.5%) at 19609.78
US 10-Yr yield is down 5.7 bps at 4.4124%
US Sep 10-Yr futures are up 14.5/32 at 110-21
EURUSD up 0.0058 (0.51%) at 1.1483
USDJPY down 0.26 (-0.18%) at 144.61
WTI Crude Oil (front-month) up $2.84 (4.37%) at $67.82
Gold is up $23.67 (0.71%) at $3347.27

European bourses closing levels:
EuroStoxx 50 down 22.23 points (-0.41%) at 5393.15
FTSE 100 up 11.27 points (0.13%) at 8864.35
German DAX down 38.66 points (-0.16%) at 23948.9
French CAC 40 down 28.43 points (-0.36%) at 7775.9

US TREASURY FUTURES CLOSE

3M10Y -7.307, 5.339 (L: 4.351 / H: 14.272)
2Y10Y +2.368, 47.126 (L: 44.381 / H: 48.49)
2Y30Y +6.074, 96.591 (L: 90.115 / H: 97.604)
5Y30Y +5.876, 89.881 (L: 82.038 / H: 90.188)
Current futures levels:
Sep 2-Yr futures up 4.375/32 at 103-20.5 (L: 103-12.5 / H: 103-20.75)
Sep 5-Yr futures up 10.5/32 at 108-1 (L: 107-14.25 / H: 108-01.75)
Sep 10-Yr futures up 14.5/32 at 110-21 (L: 109-28 / H: 110-23)
Sep 30-Yr futures up 22/32 at 113-8 (L: 111-30 / H: 113-13)
Sep Ultra futures up 19/32 at 116-14 (L: 115-00 / H: 116-25)

MNI US 10YR FUTURE TECHS: (U5) Bearish Threat Still Present

• RES 4: 111-30   76.4% retracement of the May 1 - 22 downleg
• RES 3: 111-19+ 1.0% 10-dma envelope
• RES 2: 111-14+ High Jun 5 & 61.8% of the May 1 - 22 downleg
• RES 1: 110-19+/20+ 50-day EMA / Jun 11 High
• PRICE:‌‌ 110-15 @ 16:44 BST Jun 11
• SUP 1: 109-26   Low May 29         
• SUP 2: 109-12+ Low May 22 and the bear trigger
• SUP 3: 109-09+ Low Apr 11 and key support
• SUP 4: 108-25+ 0.764 proj of the Apr 7 - 11 - May 1 price swing

The recent reversal in Treasury futures was partially erased Wednesday on the back of the soft US CPI print, keeping markets cognizant of the underlying bullish theme for Treasury prices. Key short-term resistance remains 111-14+, a Fibonacci retracement and the Jun 5 high. Clearance of this hurdle would be bullish. First resistance at the 110-19+ 50-day EMA has been pierced. Any extension lower would expose support at 109-26, the May 29 low, where a break would open key support and the bear trigger, at 109-12+, the May 22 low. 

SOFR FUTURES CLOSE

Jun 25 +0.010 at 95.688
Sep 25 +0.050 at 95.90
Dec 25 +0.075 at 96.165
Mar 26 +0.080 at 96.380
Red Pack (Jun 26-Mar 27) +0.075 to +0.085
Green Pack (Jun 27-Mar 28) +0.070 to +0.075
Blue Pack (Jun 28-Mar 29) +0.065 to +0.070
Gold Pack (Jun 29-Mar 30) +0.045 to +0.060

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

• Secured Overnight Financing Rate (SOFR): 4.28% (-0.01), volume: $2.634T
• Broad General Collateral Rate (BGCR): 4.27% (+0.00), volume: $1.083T
• Tri-Party General Collateral Rate (TCR): 4.27% (+0.00), volume: $1.051T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $112B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $284B

FED Reverse Repo Operation

RRP usage climbs to $204.625B this afternoon from $182.725B yesterday, total number of counterparties at 46. Usage had fallen to $54.772B on 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.

MNI PIPELINE: Corporate Bond Update: $1.2B Citadel Securities 2Pt Launched

• Date $MM Issuer (Priced *, Launch #)
• 06/11 $4.2B #Brown & Brown 6pt: $400M 1.5Y +65, $500M 3Y +80, $800M 5Y +92, $500M 7Y +107, $1B 10Y +117, $1B 30Y +135
• 06/11 $1.2B #Citadel Securities $700M 5Y +155, $500M 10Y +180
• 06/11 $700M Unisys 5.5NC2.5 roadshow
• Expected Thursday:
• 06/12 $Benchmark Export Development Canada (EDC) 5Y SOFR+45a

MNI BONDS: EGBs-GILTS CASH CLOSE: Early Steepening Holds After Soft US CPI

European curves steepened modestly Wednesday.

• Bunds and Gilts were under some pressure early in a global move, with some eyeing supply and some optimism on US-China trade talks which concluded late Tuesday.
• In the event, European bonds saw limited reaction to US President Trump's social media announcement that the US and China had reached a tentative trade deal. But they rallied strongly in line with Treasuries after US inflation came in softer than expected.
• Gilts held bear steepening through UK Chancellor Reeves' spending review announcement, the content of which had largely been reported beforehand, though the short-end closed stronger on the session following the US CPI move.
• There were slight upward revisions to the ECB's forward looking wage tracker compared to the April vintage, but the broader theme of softening compensation pressures remains intact.
• The German and UK curves both twist steepened, with Gilts modestly outperforming Bunds. Periphery /semi-core EGB spreads closed mixed.
• Thursday's data is highlighted by UK monthly activity, along with some final Eurozone May inflation readings. There are also multiple ECB speakers, including Muller, Escriva, Knot, Schnabel, and Guindos.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.2bps at 1.845%, 5-Yr is up 0.3bps at 2.126%, 10-Yr is up 1.2bps at 2.535%, and 30-Yr is up 3.5bps at 3.005%.
• UK: The 2-Yr yield is down 0.6bps at 3.913%, 5-Yr is down 0.5bps at 4.043%, 10-Yr is up 1bps at 4.552%, and 30-Yr is up 2.4bps at 5.278%.
• Italian BTP spread down 0.2bps at 91.1bps / French OAT unchanged at 67.2bps  

MNI FOREX: Softer-Than-Expected US Inflation Data Weighs on Greenback

• The USD index gapped to fresh weekly lows following the release of US inflation data for May. Headline inflation came in below-expected at 0.08% M/m (0.20% MNI median) - due entirely to the downside miss in core items. While the subsequent price action for the DXY was volatile, the index holds close to session lows as we approach the APAC crossover.
• Building on its recent resilient profile EURUSD has rallied well, gaining 0.6% towards the post-ECB peak at 1.1495. The recent breach of 1.1419 (May 26 high) confirmed an extension of the current bull cycle and sights are on 1.1573, the Apr 21 high and bull trigger.
• Outperformance for the single currency has been notable as market participants continue to cite the recent hawkish turn from the ECB and the building narrative around the Euro gaining in reserve status. EURAUD and EURNZD gaining the best part of 0.75% today is evidence of this.
• USDJPY had a more volatile path today, as the positive impetus for equities offset the weaker usd theme. An initial dip to 144.33 reversed aggressively back to 145.18 before the pair then tracked back towards the 144.50 mark.
• Risk-on dynamics and the softer dollar have bolstered emerging market currencies. Standing out here is the Mexican peso which has rallied 1.15% on Thursday. This extends an impressive advance following a range breakout in April to around 5%. Intra-day newsflow surrounding progress on trade talks and a relative hawkish lean from one Banxico deputy governor have provided notable peso tailwinds. Spot is closing in on initial support at 18.7774, the 50.0% retracement of the Apr 9 ‘24 - Feb 3 bull leg.
• Thursday’s data highlights include UK GDP, US PPI and jobless claims.

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
12/06/2025	0600/0700	**	GB	UK Monthly GDP
12/06/2025	0600/0700	**	GB	Trade Balance
12/06/2025	0600/0700	**	GB	Index of Services
12/06/2025	0600/0700	***	GB	Index of Production
12/06/2025	0600/0700	**	GB	Output in the Construction Industry
12/06/2025	0900/1100		EU	ECB Schnabel Visits "House of the Euro"
12/06/2025	1200/1400		EU	ECB de Guindos At Financial Integration Conference
12/06/2025	1220/1420		EU	ECB Schnabel At Financial Integration Conference
12/06/2025	1230/0830	***	US	Jobless Claims
12/06/2025	1230/0830	**	US	WASDE Weekly Import/Export
12/06/2025	1230/0830	*	CA	Household debt-to-income
12/06/2025	1230/0830	***	US	PPI
12/06/2025	1400/1000	*	US	Services Revenues
12/06/2025	1415/1615		EU	ECB Elderson At Senior Supervisors Conference
12/06/2025	1430/1030	**	US	Natural Gas Stocks
12/06/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
12/06/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
12/06/2025	1600/1200	***	US	USDA Crop Estimates - WASDE
12/06/2025	1700/1300	***	US	US Treasury Auction Result for 30 Year Bond
13/06/2025	2301/0001	**	GB	KPMG/REC Jobs Report
13/06/2025	0430/1330	**	JP	Industrial Production