MNI ASIA OPEN: Yields Climb Ahead Tax Bill Vote

EXECUTIVE SUMMARY

• MNI BRIEF: U.S. Seen Easing Canada Auto Tariffs- Martinrea
• MNI SECURITY: Fifth Round Of US-Iran Nuclear Talks Set For May 23 - Oman FM
• MNI US DATA: Mortgage Rates Again Spared Full Extent Of Swap Rate Increase
• MNI US DATA: Atlanta Fed Business Inflation Expectations Limit Increases

US

MNI BRIEF: U.S. Seen Easing Canada Auto Tariffs- Martinrea

The U.S. will eventually come to a deal with Canada providing relief on auto tariffs according to Rob Wildeboer, co-founder of parts supplier Martinrea International who met earlier this month with Treasury Secretary Scott Bessent. It's become clearer to White House advisers America's auto industry can't function without supply chains smoothly moving products across North American borders, Wildeboer told the Canadian Club of Toronto Wednesday. While U.S. decisions have been "incoherent" he said, "we’re going to get to a better place." 

NEWS

MNI SECURITY: Fifth Round Of US-Iran Nuclear Talks Set For May 23 - Oman FM

Omani Foreign Minister Badr Albusaidi has announced on X that the fifth round of US-Iran nuclear talks will take place in Rome, Italy, on Friday, May 23. The talks come as US and Iranian officials clash over Iran’s ability to continue enriching uranium for civilian nuclear purposes. Senior Iranian officials, including Iran’s supreme leader Ayatollah Ali Khamenei, have asserted their right to retain the enrichment programme within the parameters of a new deal.

MNI RUSSIA: Kremlin Denies Claims Of 'Dragging Out' Ukraine Peace Process

Speaking to reporters, Kremlin spox Dmitry Peskov says that "a lot of work on a possible Ukraine peace deal is going on behind closed doors", and claims that "no one is interested in dragging out the process." This contrasts with comments from Kyiv and Ukraine's allies, claiming that President Vladimir Putin is "playing for time" in talks with the US. 

US TSYS

MNI US TSYS: Massive Deficit Estimates Tied to Tax/Spending Bill Weighing on Bonds

• Treasuries look to finish near late Wednesday session lows, curves bear steepening: 2s10s +6.792 at 58.019 - highest level since May 1. Heavier volumes tied to Jun/Sep Tsy futures rolls, 5s well over 1M.
• No economic data, headline or outright flow to site for the move other than trepidation over Pres Trump's tax & spending bill estimated to increase the deficit appr $3.3 trillion over 10 years. Lawmakers continued to debate the bill and passage remained uncertain despite Pre Trump personally haranguing GOP holdouts.
• Treasury futures extend session lows after the $16B 20Y Bond auction (912810UL0) tailed, drawing a high yield of 5.047% vs 5.035% When-Issued yield at the cutoff; 2.46x bid-to-cover vs. 2.63x prior. Bonds yield climbed to 5.0955% intraday high - last seen late October 2023. 10Y yield up to 4.5825% (+.0956).
• The Jun'25 10Y futures contract slipped to 109-13.5 low (-25) briefly -- through initial technical support at 109-18.5 (May 15 low) before bouncing to 109-19 - strengthening a bearish theme and exposing key support at 109-08, Apr 24 low and a bear trigger.
• Cross asset update: Gold up 33.4 at 3323.42, stocks weaker with rise in bond yield (SPX emini -95.0 to 5864.75), Crude retreating (WTI -0.62 at 61.41).
• Look ahead to Thursday's data: Weekly Claims at 0830ET, Flash PMIs at 0945ET, Exist Home Sales at 1000ET and KC Fed Mfg Activity at 1100ET.

OVERNIGHT DATA

MNI US DATA: Atl Fed Business Inflation Expectations Limit Increases

• Atlanta Fed business 1Y inflation expectations dipped back to an average 2.5% in May after the 2.8% in April was the highest since May 2023 (showing expected increases in unit costs).
• The relative levels chime more closely with levelling off in the increase in consumer expectations in the NY Fed survey for April as opposed to the sharper increases in consumer measures from the Conference Board (Apr) and U.Mich (May prelim).
• The quarterly survey saw the average firm’s own price inflation of 3.9% over the past twelve months, an acceleration from the 3.5% in the Feb results but apart from that still the lowest since the question started in late 2020.
• Average expectations for the next twelve months meanwhile accelerated further from 4.0% to 5.0% for the firmest since 4Q22. 

MNI US DATA: Mortgage Rates Again Spared Full Extent Of Swap Rate Increase

MBA mortgage applications fell 5.1% (sa) last week as mortgage rates increased for a second week although were again spared a sharper increase as mortgage rate to swap spreads narrowed again.

• MBA composite mortgage applications fell 5.1% (sa) last week after a 1.1% increase the week prior. They stand at ~50% of 2019 levels.
• Both new purchases and refis saw similar sized declines, with new purchases at -5.2% after 2.3% (61% of 2019 average) and refis at -5.0% after -0.4% (39% of 2019 average).
• The 30Y conforming rate increased 6bp after a 2bp increase the previous week, with 6.92% the highest since mid-Feb.
• However, mortgage lenders again didn’t fully pass through higher swap rates over this period, with the average 10Y swap rate over the week some 16bp higher after an 11bp increase the previous week.
• It sees the mortgage rate to 10Y swap spread at 296bp for a 19bp tightening from the 315bp in early May that had been its widest since Feb 2024. 

MARKETS SNAPSHOT

Key market levels of markets in late NY trade:
DJIA down 752.79 points (-1.76%) at 41909.64
S&P E-Mini Future down 86.75 points (-1.46%) at 5871.75
Nasdaq down 226.3 points (-1.2%) at 18911.67
US 10-Yr yield is up 9.8 bps at 4.5845%
US Jun 10-Yr futures are down 20.5/32 at 109-18
EURUSD up 0.0045 (0.4%) at 1.1328
USDJPY down 0.88 (-0.61%) at 143.63
#VALUE!
Gold is up $30.58 (0.93%) at $3321.04

European bourses closing levels:
EuroStoxx 50 down 0.19 points (0%) at 5454.46
FTSE 100 up 5.34 points (0.06%) at 8786.46
German DAX up 86.29 points (0.36%) at 24122.4
French CAC 40 down 31.93 points (-0.4%) at 7910.49

US TREASURY FUTURES CLOSE

3M10Y +8.775, 23.647 (L: 11.993 / H: 24.931)
2Y10Y +6.768, 57.995 (L: 51.11 / H: 58.231)
2Y30Y +7.894, 107.392 (L: 98.772 / H: 107.922)
5Y30Y +3.781, 93.213 (L: 88.208 / H: 93.92)
Current futures levels:
Jun 2-Yr futures down 2.125/32 at 103-9.375 (L: 103-08.375 / H: 103-12.75)
Jun 5-Yr futures down 10.25/32 at 107-13 (L: 107-09.75 / H: 107-26)
Jun 10-Yr futures down 20/32 at 109-18.5 (L: 109-13.5 / H: 110-10.5)
Jun 30-Yr futures down 1-21/32 at 110-29 (L: 110-24 / H: 112-23)
Jun Ultra futures down 2-01/32 at 113-19 (L: 113-10 / H: 115-26)

MNI US 10YR FUTURE TECHS: (M5) Bear Threat Still Present

• RES 4: 112-20+ High May 1 and a bull trigger 
• RES 3: 112-01+ High May 2 
• RES 2: 111-22   High May 7 and a key near-term resistance
• RES 1: 110-24+ 50-day EMA
• PRICE:‌‌ 109-27+ @ 11:12 BST May 21
• SUP 1: 109-18+ Low May 15 
• SUP 2: 109-08   Low Apr 11 and key support
• SUP 3: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
• SUP 4: 108-21   Low Feb 19  

Treasury futures are trading lower today and maintain a bearish tone. The recent breach of 110-01+, 76.4% of the Apr 11 - May 1 bull leg, strengthens a bearish theme and exposes key support at 109-08, Apr 24 low and a bear trigger. Key near-term resistance is at 111-22, the May 7 high. A move above this level is required to signal a potential reversal. First resistance is at 110-24+, the 50-day EMA.

SOFR FUTURES CLOSE

Jun 25 steady00 at 95.685
Sep 25 -0.005 at 95.905
Dec 25 -0.015 at 96.180
Mar 26 -0.025 at 96.385
Red Pack (Jun 26-Mar 27) -0.055 to -0.04
Green Pack (Jun 27-Mar 28) -0.09 to -0.065
Blue Pack (Jun 28-Mar 29) -0.10 to -0.095
Gold Pack (Jun 29-Mar 30) -0.10 to -0.10

REFERENCE RATES (PRIOR SESSION)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.27% (-0.02), volume: $2.554T
• Broad General Collateral Rate (BGCR): 4.26% (-0.02), volume: $1.060T
• Tri-Party General Collateral Rate (TCR): 4.26% (-0.02), volume: $1.023T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $111B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $294B

FED Reverse Repo Operation

RRP usage rebounds to $162.082B this afternoon from $136.033B yesterday, total number of counterparties at 41. Usage had fallen to $54.772B last 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: $6.5B Citibank 4Pt Launched

• Date $MM Issuer (Priced *, Launch #)
• 05/21 $6.5B #Citibank $2.25 B2Y +58, $1.25B 2Y SOFR, $2.5B 5Y +78, $500M 5Y SOFR
• 05/21 $4B *ADB 5Y SOFR+42
• 05/21 $2B #Turkiye 7Y 7.45%
• 05/21 $2B #CoreWeave 5NC2 9.25%
• 05/21 $2B #BPCE $1B 6NC5 +125, $1B 11NC10 +145
• 05/21 $1.5B *OKB 3Y +34
• 05/21 $1.25B *Kommunalbanken +5Y SOFR+49
• 05/21 $1B #Northwestern Mutual Life 30Y +135a
• Expected Thursday:
• 05/21 $1B Finnvera WNG 5Y SOFR+53a

MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Again Post-UK CPI

Gilt underperformance vs Bunds extended for a second day Wednesday.

• UK CPI data was firmer than expected, particularly services inflation, even when adjusting for Easter effects.
• This drove a sell-off in Gilts which lasted throughout the morning, exacerbated by continued weakness in Treasuries.
• Though UK yields closed off the highs, they (10Y) reached the highest levels since early April.
• While Bunds weakened in sympathy with Gilts, the 10Y UK/Germany spread closed close above 210bp for the first time in a month.
• Periphery / semi-core EGBs traded mixed, with Greece a notable outperformer.
• At an MNI event this morning, ECB's Kazaks said that "If the current baseline holds, we will soon reach the terminal rate".
• Thursday's data highlight is May flash PMIs, while we also get multiple speakers including BOE's Breeden, Pill, and Dhingra, and ECB's Nagel, Holzmann and Guindos (and the accounts of the April ECB meeting).

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.9bps at 1.871%, 5-Yr is up 4.2bps at 2.193%, 10-Yr is up 4bps at 2.646%, and 30-Yr is up 4.8bps at 3.136%.
• UK: The 2-Yr yield is up 4bps at 4.083%, 5-Yr is up 4.5bps at 4.241%, 10-Yr is up 5.4bps at 4.757%, and 30-Yr is up 6bps at 5.518%.
• Italian BTP spread unchanged at 99.6bps /Greek down 1.8bps at 74bps

MNI FOREX: USD Dip Holds Through London Close

• The USD dip persisted into the Wednesday close, with the USD Index slipping to the lowest level since early May. Moves began in earnest at the NY crossover, as a re-steepening of the US curve and run lower in US equity futures triggered another phase of the 'Sell the US' theme in global markets.
• UK CPI data came in well ahead of expectations, with tax changes for transport and the timing of Easter driving price gains well ahead of both market and BoE expectations. GBP/USD rallied in response, with the pair hitting a new multi-year high at 1.3469. These gains were short-lived, however, despite a further contraction of rate cut pricing across UK OIS markets.
• We note that GBP/USD has struggled to maintain gains above the 1.34 handle on several occasions already this year, as well as in 2024, 2019 and 2020. Spot gains today saw a brief print at 1.3469, but markets have already reversed ~60 pips off the high to contain the overall bullish breakout. The keeps focus on the bearish tweezer candle formation printed on April 28/29, which could mark a near-term top. 1.3342 undercuts as first support, ahead of the more meaningful 50-day EMA at 1.3137. A move through here would challenge the near-term bullish trend narrative.
• New daily lows for USD/CAD and EUR/CAD were printed through the London close, shrugging off the slippage in crude oil prices after the surprise in crude oil inventories at the weekly DoE numbers. The price action keeps the trend condition in USDCAD bearish, and confirms recent gains as corrective. Moving average studies are in a bear-mode position, highlighting the dominant downtrend that targets 1.3744, a Fibonacci retracement.
• Thursday trade should be led by prelim PMI data for May, with the core European states seen posting only minor improvements in growth prospects across the month - as firms across both manufacturing and services sectors remain under pressure from the uncertainties surrounding tariffs and global geopolitics. Weekly jobless claims data are the US calendar highlight, while the central bank speaker slate also picks up. Appearances are due from ECB's Holzmann, Vujcic, Elderson, Escriva & de Guindos, Fed's Barkin & Williams, BoE's Breeden, Pill & Dhingra as well as RBA's Hauser. 

THURSDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
22/05/2025	0600/0700	***	GB	Public Sector Finances
22/05/2025	0645/0845	**	FR	Manufacturing Sentiment
22/05/2025	0715/0915	**	FR	S&P Global Services PMI (p)
22/05/2025	0715/0915	**	FR	S&P Global Manufacturing PMI (p)
22/05/2025	0730/0930	**	DE	S&P Global Services PMI (p)
22/05/2025	0730/0930	**	DE	S&P Global Manufacturing PMI (p)
22/05/2025	0800/1000	***	DE	IFO Business Climate Index
22/05/2025	0800/1000	**	EU	S&P Global Services PMI (p)
22/05/2025	0800/1000	**	EU	S&P Global Manufacturing PMI (p)
22/05/2025	0800/1000	**	EU	S&P Global Composite PMI (p)
22/05/2025	0830/0930	***	GB	S&P Global Manufacturing PMI flash
22/05/2025	0830/0930	***	GB	S&P Global Services PMI flash
22/05/2025	0830/0930	***	GB	S&P Global Composite PMI flash
22/05/2025	1000/1100	**	GB	CBI Industrial Trends
22/05/2025	1050/1150		GB	BOE's Breeden On Climate Panel
22/05/2025	1100/1200		GB	BOE's Dhingra On UK Productivity Panel
22/05/2025	1130/1330		EU	ECB April Minutes Released
22/05/2025	1200/0800		US	Richmond Fed's Tom Barkin
22/05/2025	1230/0830	***	US	Jobless Claims
22/05/2025	1230/0830	**	US	WASDE Weekly Import/Export
22/05/2025	1230/0830	*	CA	Industrial Product and Raw Material Price Index
22/05/2025	1230/1330		GB	BOE's Pill At MonPol Conference (Text 16:30BST)
22/05/2025	1300/1500	**	BE	BNB Business Confidence
22/05/2025	1345/0945	***	US	S&P Global Manufacturing Index (Flash)
22/05/2025	1345/0945	***	US	S&P Global Services Index (flash)
22/05/2025	1400/1000	***	US	NAR existing home sales
22/05/2025	1400/1000	*	US	Services Revenues
22/05/2025	1430/1030	**	US	Natural Gas Stocks
22/05/2025	1500/1100	**	US	Kansas City Fed Manufacturing Index
22/05/2025	1500/1700		EU	ECB's Elderson Dinner Speech at Biodiversity Day
22/05/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
22/05/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
22/05/2025	1535/1735		EU	ECB's de Guindos Speech in Madrid
22/05/2025	1700/1300	**	US	US Treasury Auction Result for TIPS 10 Year Note
22/05/2025	1800/1400		US	New York Fed's John Williams
22/05/2025	1900/1500		US	New York Fed's Roberto Perli
23/05/2025	2301/0001	**	GB	Gfk Monthly Consumer Confidence
23/05/2025	2330/0830	***	JP	CPI