US: MNI POLITICAL RISK - GOP Pivots On Reconcillation Tax Plans

• MNI speaks to prominent Chinese economist and government advisor about the response to U.S. tariffs -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com

Gilt futures have pierced key support at 90.55 (March 27 low), confirming a full reversal of the Mar 27 - Apr 7 rally. Futures are now -188 ticks at 90.24, with the psychological round-number 90.00 level providing the next downside target.

• UK PM Starmer’s attempts to reassure markets that the UK’s fiscal rules are “iron clad and here to stay” appear to have been unsuccessful, with a renewed downtick in US Treasury futures keeping the pressure on UK paper.
• The Gilt curve remains twist steeper, with 2-year benchmark yields down 1.5bps and 30-year yields up an impressive 28bps.
• 30-year benchmark yields are now at 5.63%, the highest since 1998. That sees 2s30s up ~30bps to 168.5bps, the steepest since 2017.
• A reminder that BOE Deputy Governor Breeden will speak on “UK Economic and Financial Stability Prospects” at an MNI webcast tomorrow at 1400BST. Register here.

• Spot USD/JPY edges through the earlier lows of Y144.61, hitting the lowest level since early October last year in the process. A turn back toward low for the e-mini S&P and further weakness in US bonds are largely responsible.
• Given the broad spot volatility, no surprise to see very healthy G10 FX activity today, evident in volumes being well ahead of average for this time of day. Following the flurry of trade on the China counter-tariff headlines, CME JPY futures are posting total volumes near 40% ahead of average for this time of day. This activity will likely remain supported as markets are on watch for any comments from Trump on Beijing's actions today: Y144.13 marks next key support: the 76.4% retracement for the Sep 16 '24 - Jan 10 bull leg.
• Interestingly, Bessent highlighted that higher European and Japanese fiscal spending due to US-led measures are the reason for the dollar weakening bilaterally - and that a strong JPY is "natural".