MNI US MARKETS ANALYSIS - New EUR Highs on German Concessions

Highlights:

• Signs of concession in German politics help drive EUR to new highs
• Equities off lows, but conviction sentiment remains particularly fragile
• JOLTS eyed for insight into labour market ahead of next week's Fed decision

US TSYS: Latest Gains Pared Amidst Solid Volumes, JOLTS and 3Y Supply Later On

• Treasuries sit mildly twist flatter having pared further large dovish moves with and shortly after the Asia open. The subsequent shift off highs has come with some stabilization in equities after yesterday’s heavy declines on growth concerns emanating from US policies.
• Today sees further labor data headlining the docket with the January JOLTS report, but with upcoming CPI/PPI reports on Wed/Thu looming large. It’s followed by 3Y supply after last month’s auction stopped through by 1.2bp along with a sizeable rise in indirect take-up.
• Cash yields range from 1.4bp higher (2s) to 0.3bp lower (30s).
• 2s10s sits at 31.9bp (-1.4bp) as it remains within recent ranges having steepened in early March.
• TYM5 is back little changed on the day at 111-09+ (-01) having pulled back from highs of 111-25, with heavy cumulative volumes of 635k.
• The trend structure remains bullish and the overnight high cleared resistance at 111-15 (Mar 5 high) to open 112-01 (Mar 4)/112-02 (Fibo projection).
• Data: JOLTS Jan (1000ET)
• Coupon issuance: US Tsy $58B 3Y Note Auction - 91282CMS7 (1300ET)
• Bill issuance: $70B 6W bill auction (1130ET)

STIR: Fed Rates Off Recent Dovish Extremes

• Fed Funds implied rates have pared further large dovish moves overnight with some stabilization in equities (including a 1.5% intraday lift in S&P 500 futures) after yesterday’s heavy declines on growth concerns emanating from US policies.
• Cumulative cuts from 4.33% effective: 0.5bp Mar, 13bp May, 32bp Jun, 45bp Jul and 81bp Dec.
• The 81bp of cuts for 2025 is still towards the dovish end of recent ranges but has shifted from 90bp at one point overnight for fresh highs for rate cut expectations since October.
• Ahead of the upcoming Mar 18-19 FOMC meeting with fresh economic forecasts and dot plot, recall that the hawkish December SEP only had 50bp of cuts pencilled in for 2025. 

UKRAINE: Talks w/US Officials Start in Saudi Arabia

Talks between senior US and Ukrainian officials in the Saudi Arabian city of Jeddah are scheduled to get underway at the top of the hour. The US side will be represented by the same team that met with senior Russian officials in late February: Secretary of State Marco Rubio, National Security Adviser Mike Waltz and Middle East envoy Steven Witkoff. Despite being in Saudi Arabia, Ukrainian President Volodymyr Zelenskyy will not participate in the meeting. The Ukrainian gov't will be represented by Head of the Presidential Office Andriy Yermak, Defence Minister Rustem Umerov and Foreign Minister Andrii Sybiha, 

• On his way to Saudi Arabia, Rubio said “They’ve [Ukrainians] suffered greatly and their people have suffered greatly, and it’s hard in the aftermath of something like that to even talk about concessions. But that’s the only way this is going to end to prevent more suffering.” Rubio told reporters this meeting would be used to see what Ukraine is “willing to do in order to achieve peace”.
• For Ukraine, the main aim of today's talks will be for the US to be sufficiently content with Ukraine's stance on concessions that it turns the aid taps back on.
• Comments from Kremlin spox Dmitry Peskov on state-run TASS. Says that the US will inform Russia about today's talks in Saudi. Peskov says the Kremlin will give info on the rumoured visit of Witkoff to Moscow for talks with President Vladimir Putin "in a timely manner". 

US TSY FUTURES: Long Setting Seen Across The Curve On Monday

OI data points to fresh net longs being set across the curve during Monday’s rally, with a net ~$5.2mln of DV01 equivalent exposure added.

• FV futures saw the largest net positioning swing on the day.

STIR: Long Setting Seen Across Most Of SOFR Futures Strip On Monday

OI data suggests that long setting was most prominent during Monday’s uptick in SOFR futures, as questions surrounding U.S. economic exceptionalism continued to resonate.

• That left 3 of the front 4 packs subjected to net long setting on the day.
• The most meaningful break of the wider trend came via net short cover between SFRU6-H7.

EUROPE ISSUANCE UPDATE: 

Gilt syndication: Record size

• GBP5.0bln (larger than the GBP4.0-4.5bln MNI expected; largest ever gilt linker syndication) of the new 1.875% Sep-49 I/L gilt. Spread set at 0.125% Aug-48 linker (GB00BZ13DV40) + 1.0bp (Guidance was +1.0/1.5bps), books in excess of GBP67.5bln.

EU syndication

• E9bln WNG (MNI expected E7-10bln) of the new Dec-35 EU-bond. Guidance MS+67bps area, books open.

German auction results

• That wasn't the strongest Schatz auction with the stop price of 99.955 a little above the closing window price of 99.957 (although there was a concession a minute or so earlier that traded down to 99.952.
• Note that the price fell marginally on the result publication.
• E4.5bln (E3.497bln allotted) of the 2.20% Mar-27 Schatz. Avg yield 2.22% (bid-to-offer 1.84x; bid-to-cover 2.37x).

EGBS: Italy Trying To Steer Clear Of Higher Issuance Burdens

10-year EGB spreads to Bunds have been relatively resilient in the face of increased European defence spending prospects over the past week. Widening pressures have been limited by the German-centric nature of headline flow and prospects for joint-EU funding programmes, which should limit issuance burdens at the sovereign level.

• Spreads have narrowed intraday amid a recovery in European equities and pullback in Bund futures, after the German Green party signalled hopes for a defence spending deal by the end of this week.
• BTPs outperform, with spreads to Bunds ~2.5bps tighter at ~110.5bps. Note that the spread mechanically widened at the end of February owing to a BBG benchmark roll.
• The Italian Government has not fully embraced the prospect of increased borrowing to fund defence spending. This is somewhat unsurprising given Italy is subject to an EU Excessive Deficit Procedure, and so would not want to hamper last year's fiscal consolidation progress.
• Last week, the Government reported a preliminary 2024 budget deficit to GDP ratio of 3.4% - lower than analyst and European Commission projections. Full Q4 2024  (and FY 2024) fiscal data is due on April 4th.
• Bloomberg reported yesterday evening that Italy plans to propose a vehicle that would leverage E16.7bln of public money into E200bln in private investment for strategic defense and aerospace projects. Such a vehicle would thus limit domestic fiscal (and issuance) burdens.
• Meanwhile, last week foreign minister Tajani said that Italy would not use the E150bln of cohesion funds earmarked in the EU’s recent announcement for defence spending - instead wanting to allocate such funds "elsewhere".

FOREX: EUR Buoyed as Differences Narrow in German Politics

• The EUR trades well, helping buoy EUR/USD to another cycle high of 1.0921 after The Greens yesterday appeared to soften their resistance to supporting the debt brake proposals before the end of this parliament - meaning sufficient concessions are likely to be made to pass the legislation before a trickier set of Bundestag mathematics kicks in for the upcoming parliament.
• EUR/USD now faces resistance at 1.0937 next, clearance above which would cement a break of the US election highs, and add to the near-term upward momentum in the pair. As a result, the USD is offered against most others, with only the JPY underperforming. EUR/JPY remains below the 100-dma, which marks the next upside level at Y161.32.
• Scandinavian currencies remain particularly firm. Norway followed Sweden's headline-beating pace of inflation yesterday, meaning market pricing for easing from both the Swedish RIksbank as well as the Norges Bank has contracted sharply - supporting both currencies. USD/NOK has corrected to new YTD lows, testing 10.6605 support - the 76.4% retracement for the rally posted off the September 2024 lows.
• US JOLTS jobs data marks the calendar highlight Tuesday, as markets look for higher quality data on the labour markets following last week's NFP print and headed into next week's FOMC decision. There are no remaining central bank speakers today, leaving focus on geopolitical risks as Ukrainian and US representatives meet in Saudi Arabia to discuss the prospect of peace talks and settlements with Russia. 

OPTIONS: Expiries for Mar11 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0540-50(1.2bln), $1.0800-15(E752mln), $1.0875(E504mln)
• USD/JPY: Y146.45-65($1.0bln), Y148.70($543mln)
• EUR/GBP: Gbp0.8325-35(E626mln)
• AUD/USD: $0.6300-10(A$946mln), $0.6385(A$2.5bln)
• NZD/USD: $0.5645(N$652mln)
• USD/CAD: C$1.4390-00($943mln), C$1.4470($617mln)

EQUITIES: E-Mini S&P Sell-Off Monday Strengthens Bearish Conditions

• The trend in the Eurostoxx 50 futures contract is unchanged, it remains bullish and the latest pullback appears corrective. Support at the 50-day EMA, at 5309.38, remains intact for now. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend.  However, a clear break of the 50-day EMA would signal a possible reversal. A resumption of gains would refocus attention on the 5600.00.
• A bear threat in S&P E-Minis remains present and Monday’s extension strengthens bearish conditions. The move down also reinforces the significance of the breach of 5809.00, the Jan 13 low. This level marked the mid-point of a double top on the daily chart and the break confirms the pattern and an important short-term reversal. Sights are on 5499.25, the Sep 9 2024 low. Firm resistance to watch is 5979.06, the 50-day EMA.

EQUITIES: AAII Net U.S. Equity Sentiment Hits Lowest Since March '23

Questions surrounding U.S. economic exceptionalism and the clouded policy outlook have pushed the AAII’s net U.S. equity sentiment reading to the lowest level seen since March ’23.

• Note that the index tends to operate in negative territory and is viewed as a contrarian indicator.
• Elsewhere, several large sell-side names have turned neutral on U.S. equity benchmarks in recent days (from bullish previously).

Fig. 1: AAII Net U.S. Equity Sentiment

Source: MNI - Market News/AAII/Bloomberg

COMMODITIES: Gold in Consolidation Mode, Trend Remains Bullish

• A bearish trend condition in WTI futures remains intact and last week’s fresh short-term cycle lows reinforce current conditions. Recent weakness has resulted in a clear breach of support at $70.20, the Feb 6 low. This confirmed a resumption of the downtrend that started Jan 15 and has paved the way for an extension towards $63.61 next, the Oct 10 ‘24 low. Key short-term pivot resistance is seen at $70.36, the 50-day EMA.
• Gold is in consolidation mode. The trend condition remains bullish and the recent pullback appears to have been a correction. A stronger rally would refocus attention on $2962.2, a Fibonacci projection. This would also open the $3000.0 handle. On the downside, a resumption of weakness would instead suggest scope for a deeper correction and expose support around the 50-day EMA, at $2826.3. The 50-day average marks a key support.

Date	GMT/Local	Impact	Country	Event
11/03/2025	-	***	CN	New Loans
11/03/2025	-	***	CN	Money Supply
11/03/2025	-	***	CN	Social Financing
11/03/2025	1255/0855	**	US	Redbook Retail Sales Index
11/03/2025	1400/1000	***	US	JOLTS jobs opening level
11/03/2025	1400/1000	***	US	JOLTS quits Rate
11/03/2025	1600/1200	***	US	USDA Crop Estimates - WASDE
11/03/2025	1700/1300	***	US	US Note 03 Year Treasury Auction Result
12/03/2025	0001/0001	*	GB	RICS House Prices
12/03/2025	0730/0730		GB	DMO propose calendar for first 3 weeks of FY25/26
12/03/2025	0845/0945		EU	Lagarde at "ECB and Its Watchers" conference Frankfurt
12/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
12/03/2025	1100/0700	**	US	MBA Weekly Applications Index
12/03/2025	1100/1200		EU	ECB Wage Tracker
12/03/2025	1230/0830	***	US	CPI
12/03/2025	1345/0945	***	CA	Bank of Canada Policy Decision
12/03/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
12/03/2025	1515/1615		EU	Lane at "ECB and Its Watchers" conference Frankfurt
12/03/2025	1700/1300	**	US	US Note 10 Year Treasury Auction Result
12/03/2025	1800/1400	**	US	Treasury Budget