MNI US MARKETS ANALYSIS - Quiet Start to Busy Week

Highlights:

• Treasuries fade off highs as Bessent points to progress in trade talks with Asia
• Quiet start to a busy week, with frenetic schedule of earnings, data releases and political risk
• 39% of the S&P are set to report this week, with Apple, Amazon, Meta, Visa and Mastercard among them

US TSYS: Modestly Lower; On Headline Watch Before Tsy Borrowing Estimates

• Treasuries are modestly lower in a paring of the rally seen in the second half of last week, amidst mixed equity performance overnight.
• Today’s focus will likely be on US policy headlines following President Trump’s attendance of Pope Francis’ funeral – both on trade deals and a Ukraine-Russia ceasefire – before attention turns to the Treasury’s quarterly borrowing estimates at 1500ET (MNI Refunding Preview here).
• US Tsy Sec Bessent said on Sunday that he did now know if Trump had spoken to China President Xi, calling into doubt Trump’s suggestion last week that Xi had called him. Bessent said he believed there was a "path" to negotiations with China whilst calling Trump's tariff policy approach "strategic uncertainty".
• This week also sees a heavy earnings calendar, including Microsoft, Meta, Amazon and Apple, although today’s slate is light.
• Cash yields are 2-4bp higher on the day, with increases led by 7s.
• 10Y yields bottomed out at 4.231% overnight for lows prior to the Apr 9 90-day tariff ‘pause’, currently at 4.272%.   
• TYM5 trades at 111-13+ (-03) having eased back from late Fri/overnight highs of 111-22+, on thin cumulative volumes of 225k.
• Those latest gains cleared Wednesday’s 111-18+ but stopped short of testing resistance at 111-25 (50% retrace of Apr 7-11 bear leg). Clearance of the latter would undermine a bearish theme and open 112-12 (61.8% retrace).
• Data: Dallas Fed mfg Apr (1030ET)
• US Tsy Quarterly borrowing estimates (1500ET, before full QRA on Wed at 0830ET)
• Bill issuance: US Tsy $76B 13W & $68B 26W bill auctions (1130ET)

STIR: Fed Rates See A Mild Paring Of Friday’s Rally, In FOMC Blackout

• Fed Funds implied rates are 1-3bp higher from Friday’s close for 2025 meetings amidst broader downward pressure on fixed income.
• It’s a mild paring of the rally seen in the second of last week that continued right up to the weekend.
• The rate path is accordingly firmly within last week’s range with a next Fed cut more than fully priced for the July meeting.  
• Cumulative cuts from 4.33% effective: 2bp for next week, 16bp Jun, 35.5bp Jul, 55.5bp Sep and 86.5bp Dec.
• The SOFR implied yield of 3.14% (SFRU6, +2.5bp) remains at familiar levels, still ~25bp lower than pre Apr 2 Liberation Day levels.
• The FOMC is in media blackout ahead of the May 6-7 meeting.
• In case missed late on Friday, Kevin Warsh (frontrunner for the next Fed Chair) said the best way for the Fed to safeguard its independence is for policymakers to avoid expanding the institution's role over time, including wading into policy areas that are outside its core mission. He added the ideas of data dependence and forward guidance widely adopted by Fed officials are not especially useful and might even be counterproductive. 

BOE: Will "gradual" remain in the May guidance? (1/2)

• Last week saw a number of MPC speakers but we didn’t hear an awful lot in terms of their views of policy ahead. Most stuck to the script of tariffs being negative for growth but that the impact on inflation was unclear. The only exception was Greene who initially communicated this line but when pushed said that she thought tariffs could be more deflationary.
• Given the number of MPC members who spoke, we think there is strong view that this was a coordinated policy communication (or indeed lack of). This leaves options open for the May MPC meeting which will be accompanied by an MPR and press conference.
• Looking ahead to that meeting, there are three strands of communication that underpin the Bank’s forward guidance. First that monetary policy needs to “remain restrictive” – we think it would be unlikely to see this wording is removed when there is still so much uncertainty about where prices will go in the next couple of CPI prints. These prints are significant as a number of service firms in particular reset their prices around April / May – and with employer NICs increasing there is an even greater uncertainty than usual. “Restrictive” will have to go at some point, but we think that is more likely to be a language change in either June or August.

BOE: Will "gradual" remain in the May guidance? (2/2)

• The second buzzword is “careful” – and this is a word that the MPC has communicated means that there is elevated uncertainty. Uncertainty has risen, rather than fallen, since the last MPC meeting. And hence it would be very surprising to us if this language was to change.
• That leaves “gradual” as the last significant part of the guidance. The market has taken “gradual” to mean quarterly and indeed external MPC member Professor Alan Taylor stated in a Treasury Select Committee that his view of gradual was that it meant quarterly cuts. If the MPC wants to potentially open the door to a change in the guidance it could remove the word “gradual” but temper it by keeping “restrictive” and “careful”. This effectively would signal to the market that there was a possibility that the BOE may accelerate rate cuts as far as neutral, which would at least open up the potential for back-to-back cuts between May and August.
• We do hear from both Governor Bailey and Deputy Governor Lombardelli again this week, but we would be very surprised if either said anything pertinent to the near-term monetary policy outlook.

EUROPE ISSUANCE UPDATE: 

France syndication: Mandate

• "As considered in the 2025 State financing programme published in December 2024, Agence France Tresor announces the syndicated increase of the Green OAT 3.00% 25 June 2049 to be launched in the near future, subject to market conditions. [...] All primary dealers will be invited to participate in the syndicate."
• MNI pencils in a E4-8bln transaction size (a bit more uncertain than usual given it's a tap).

Finland syndication: Mandate

• "The Republic of Finland has mandated [a set of banks] to lead manage its forthcoming long 10-year EUR Benchmark transaction. The transaction will have a 15 September 2035 maturity and is expected to be launched in the near future subject to market conditions."
• This was largely expected for late April and we pencil in a E4bln transaction size.

EU-bond auction results

• E2.056bln of the 2.875% Oct-29 EU-bond. Avg yield 2.33% (bid-to-cover 1.26x).
• E1.826bln of the 3.00% Dec-34 EU-bond. Avg yield 2.984% (bid-to-cover 1.23x).
• E1.174bln of the 3.375% Oct-38 EU-bond. Avg yield 3.38% (bid-to-cover 1.42x).

Belgium auction results

• E970mln of the 2.85% Oct-34 OLO. Avg yield 2.991% (bid-to-cover 1.90x).
• E1.136bln of the 3.10% Jun-35 OLO. Avg yield 3.076% (bid-to-cover 1.92x).
• E1.11bln of the 2.75% Apr-39 Green OLO. Avg yield 3.389% (bid-to-cover 1.92x).

GERMAN DATA: IFO Employment Picks Up From Lows But Remains Below Neutral

The IFO employment barometer rose to 93.9 points in April, up from March's 92.8, and this marks the highest print since September. Despite the increase, the indicator remains in contractionary territory, indicating further job cuts.

• “It is still too early to speak of a trend reversal on the labor market [...] we are seeing a sharp rise in uncertainty, which could exacerbate the situation again”, IFO comments.
• Across sectors, improvements were broad-based barring the construction industry - see chart below.
• The Eurozone flash PMI saw "continued falls in employment in the largest two Eurozone economies" in April - also painting a weak picture of the German labour market.
• Specifically in the small- and medium enterprise sector, the German labor market is deteriorating currently, with employment declining 0.7% Y/Y in March according to Datev data seen by newspaper FAZ. The broader monthly labour market update for Germany is due Wednesday, with unemployment expected to tick up by 15k in March, but the u/e rate unchanged at 6.3%.

FOREX: USD Furtively Firmer in Low Conviction Morning

• The dollar is furtively firmer, but markets trade with little conviction early Monday having digested comments from US Treasury Secretary Bessent over the weekend. Bessent talked up the progress of trade talks and negotiations with other parties after a meeting with his Japanese counterpart today - and stated that "some talks are moving well, especially with Asia".
• Equity futures are firmer across Europe, but lag somewhat in the US ahead of a busy earnings week. Earnings from Microsoft, Meta Platforms, Amazon and Apple are all due - covering a large swathe of the Magnificent Seven megacaps.
• Across G10, GBP trades well, gaining moderately against all others. Nonetheless, GBP/USD remains below last week's highs - which mark first resistance at 1.3349. Clearance above here opens more challenging levels at the cycle high of 1.3424 posted on the last USD slide. UK data is few and far between this week, however local election results on Thursday will provide the latest insight into how Starmer's government is performing inside the first year.
• It's a quiet data session to begin the week, with risk events and releases picking up across the week - culminating in MNI Chicago PMI on Wednesday, and the Payrolls report following on Friday. The Fed remain inside their pre-meeting media blackout, meaning central bank speak should be muted into next week's decision. ECB's Rehn and de Guindos are set to appear. 

OPTIONS: Expiries for Apr28 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1250(E2.6bln)
• USD/JPY: Y140.00($1.5bln)
• AUD/USD: $0.6620(A$787mln)

EQUITIES: Corrective Bull Cycle in E-Mini S&P Remains in Play

Eurostoxx 50 futures are holding on to their recent gains. The contract has cleared the 20-day EMA and pierced resistance at the 50-day EMA, at 5101.10. A clear break of this average would strengthen the current bull cycle and signal scope for a continuation of the corrective uptrend. This would open 5165.00 next, the Apr 3 high. On the downside, support to watch lies at 4812.00, the Apr 16 low. Clearance of this level would highlight a reversal. The corrective bull cycle in S&P E-Minis that started on Apr 7, remains in play. The contract traded higher last week and breached a number of important short-term resistance points. Price has cleared the 20-day EMA and pierced 5528.75, the Apr 10 high. The next key resistance is 5622.38, the 50-day EMA. A clear breach of this EMA would strengthen a bull theme. Initial key support lies at 5127.25, the Apr 21 low. A break would be bearish.

• Japan's NIKKEI closed higher by 134.25 pts or +0.38% at 35839.99 and the TOPIX ended 22.58 pts higher or +0.86% at 2650.61.
• Elsewhere, in China the SHANGHAI closed lower by 6.645 pts or -0.2% at 3288.415 and the HANG SENG ended 8.78 pts lower or -0.04% at 21971.96.
• Across Europe, Germany's DAX trades higher by 90.52 pts or +0.41% at 22333.85, FTSE 100 higher by 30.81 pts or +0.37% at 8446.66, CAC 40 up 43.68 pts or +0.58% at 7579.94 and Euro Stoxx 50 up 24.1 pts or +0.47% at 5178.22.
• Dow Jones mini down 43 pts or -0.11% at 40210, S&P 500 mini down 13 pts or -0.23% at 5537, NASDAQ mini down 47 pts or -0.24% at 19488.75.

COMMODITIES: Gold Continues to Trade Below Latest Record Highs

A bearish theme in WTI futures remains intact and the recovery that started on Apr 9 appears corrective. The move higher has allowed an oversold trend condition to unwind. Recent weakness resulted in the breach of a number of important support levels, reinforcing a bearish threat. A resumption of the bear cycle would open $53.72, a Fibonacci projection. Resistance to watch is $65.73, the 50-day EMA. Gold continues to trade below its recent highs. The trend needle points north and the latest move down appears corrective. The retracement is allowing an overbought condition to unwind. Moving average studies are unchanged, they remain in a bull-mode position highlighting a dominant uptrend. The next objective is $3547.9, a Fibonacci projection. Initial firm support to watch lies at 3219.4, the 20-day EMA.

• WTI Crude down $0.12 or -0.19% at $62.9
• Natural Gas up $0.01 or +0.44% at $2.95
• Gold spot down $34.02 or -1.02% at $3286.43
• Copper down $2.35 or -0.48% at $487.1
• Silver down $0.15 or -0.44% at $32.9734
• Platinum up $6.86 or +0.7% at $983.66

Date	GMT/Local	Impact	Country	Event
28/04/2025	1300/1500		EU	ECB's de Guindos Presenting 2024 Annual Report
28/04/2025	1400/1000	**	US	housing vacancies
28/04/2025	1430/1030	**	US	Dallas Fed manufacturing survey
28/04/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
28/04/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
29/04/2025	2301/0001	*	GB	BRC Monthly Shop Price Index
29/04/2025	0600/0800	*	DE	GFK Consumer Climate
29/04/2025	0600/0800	**	SE	Private Sector Production m/m
29/04/2025	0600/0800		SE	Flash Quarterly GDP Indicator
29/04/2025	0600/0800	**	SE	Retail Sales
29/04/2025	0700/0900	**	SE	Economic Tendency Indicator
29/04/2025	0700/0900	***	ES	HICP (p)
29/04/2025	0700/0900	***	ES	GDP (p)
29/04/2025	0700/0900		EU	ECB's Cipollone On Financial and Trade Fragmentation
29/04/2025	0800/1000	**	EU	M3
29/04/2025	0800/1000	**	IT	ISTAT Consumer Confidence
29/04/2025	0800/1000	**	IT	ISTAT Business Confidence
29/04/2025	0800/1000	**	EU	ECB Consumer Expectations Survey
29/04/2025	0900/1100	*	EU	Consumer Confidence, Industrial Sentiment
29/04/2025	0900/1000	*	GB	Index Linked Gilt Outright Auction Result
29/04/2025	0940/1040		GB	BOE Ramsden At Innovate Finance Global Summit
29/04/2025	1230/0830	**	US	Advance Trade, Advance Business Inventories
29/04/2025	1255/0855	**	US	Redbook Retail Sales Index
29/04/2025	1300/0900	**	US	S&P Case-Shiller Home Price Index
29/04/2025	1300/0900	**	US	FHFA Home Price Index
29/04/2025	1300/0900	**	US	FHFA Home Price Index
29/04/2025	1400/1000	***	US	Conference Board Consumer Confidence
29/04/2025	1400/1000	***	US	JOLTS jobs opening level
29/04/2025	1400/1000	***	US	JOLTS quits Rate
29/04/2025	1430/1030	**	US	Dallas Fed Services Survey