MNI US MARKETS ANALYSIS - Treasuries Testing Support

Highlights:

• Treasuries test support ahead of two-year supply
• Australian budget surprises with pre-election income tax cuts
• Joint US-Russia statement on ceasefire could be cancelled, with no further Trump-Putin talks scheduled

US TSYS: TYA Testing Another Support; Confidence, Kugler and 2Y Supply Ahead

• Treasuries are again testing lows amidst a broader sell-off, with EGBs ostensibly underperforming on the day although much of that looks like catch-up for price action since yesterday’s close.
• Today’s see consumer confidence headline various second tier data releases, permanent voter Kugler speaking for the first time since last week’s FOMC and 2Y supply after last month’s booming demand from indirects.
• US equity futures hold onto the bulk of yesterday’s strong gains whilst crude oil futures have modestly extended gains.
• Cash yields are 2-3bp higher on the day, whilst 2s10s at 31bp (+0.6bp) is within recent ranges.
• TYM5 is again testing recent lows after yesterday’s clearance of 20-day EMA support, with a latest low of 110-10 (-07+) dipping through 110-12+ (Mar 6/13 lows). Volumes are reasonable at 325k.
• A clearer break could open 110-05+ (50-day EMA) before a key 110-00 (Feb 7 high), although the trend structure remains bullish with resistance at 111-17+ (Mar 20 high).
• Data: Philly Fed non-mfg Mar (0830ET), FHFA/S&P CoreLogic house prices Jan (0900ET), Conf. Board consumer survey Mar (1000ET), New home sales Feb (1000ET), Richmond Fed mfg Mar (1000ET)
• Fedspeak: Kugler on economy (text only), Williams opening remarks (text only)
• Coupon issuance: US Tsy $69B 2Y Note auctions - 91282CMV0 (1300ET). Last month’s 2Y auction stopped through by 1bp whilst indirect take surged to a new high of 85.5%, bouncing from 65.0% to clear the previous high of 82.1% in December.
• Bill issuance: US Tsy $70B 6W bill auction (1130ET)

STIR: Fed Rate Path Continues Return Closer To Pre-FOMC Levels

• Fed Funds implied rates have extended yesterday’s climb amidst a broader FI sell-off through European hours.
• It leaves a rate path back little changed to slightly higher than just before Powell on Wed although still a little below pre-SEP levels – see comparison table below.
• Cumulative cuts from 4.33% effective: 4bp May, 16.5bp Jun, 26.5bp Jul (32bp pre yesterday’s PMI), 41bp Sep and 59bp Dec (67bp pre-PMI).
• Today sees multiple second tier data releases, with the pick likely the Conference Board consumer survey where it’s labor differential will no doubt be watched closely.
• We also hear from Kugler (permanent voter, hawkish leaning) for the first time since last week’s FOMC:
  • 0840ET – Gov. Kugler speech on economy & entrepreneurship (text only). Kugler has tilted more hawkish in recent months, saying on Mar 7 it’s appropriate to hold the policy rate steady for “some time” and was watching inflation persistence amidst “important upside risks to inflation”.
  • 0905ET – NY Fed’s Williams (permanent voter) opening remarks at NY Fed conference (text only). He has already spoken post-FOMC, with remarks on Mar 21 suggesting little change to his pre-FOMC view: "The current modestly restrictive stance of monetary policy is entirely appropriate given the solid labor market and inflation still running somewhat above our 2 percent goal. It also positions us well to adjust to changing circumstances that affect the achievement of our dual mandate goals."

MNI Norges Bank Preview- Mar 25: Don’t Fully Rule Out The Cut

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Norges Preview - 2025-03.pdf

EXECUTIVE SUMMARY

• Norges Bank’s March decision is set to be a very close call between a 25bp cut to 4.25% and a hold at 4.50%. Of the analyst previews we have seen, seven expect a hold while five expect a 25bp cut.  Although the data since the January decision will contribute to hawkish revisions to the March MPR rate path, we still think markets are underpricing the implied probability of a cut.
• The prospect of anything other than a 25bp cut in March appeared highly unlikely just a few weeks ago. Both the September and December MPR rate paths essentially fully priced 25bps of easing in Q1, while the December and January policy statements included clear guidance for a cut at the upcoming meeting. However, the February headline and underlying inflation readings were much higher than expected. Taken alongside a lower-than-expected unemployment rate, consensus amongst markets and analysts shifted towards a March hold. 

UKRAINE: US-Ukraine Talks End; Speculation Joint US-Russia Statement Cancelled

Comments from Kremlin spox Dmitry Peskov are being reported by state media following the conclusion of talks in Saudi Arabia between Russian and US teams. Peskov says that contacts between the two sides will continue and that the content of the 'technical consultations' will not be disclosed to the public. Says that the 'results of the talks are being analysed', but there are unverified reports on social media claiming that the joint statement that was due to have been released nearly two hours ago has been cancelled. 

• These unverified reports claim that Russian diplomat, Senator Grigory Karasin, said "We discussed everything - it was a tense discussion. But very useful for both sides. We are far from a full-fledged solution or agreement on all points, but it seems that such a discussion is timely."
• Peskov says that there are no plans for further talks between Presidents Vladimir Putin and Donald Trump, but "it can be organised promptly if needed".
• Following on from the Russia-US talks that concluded late on 24 March, Ukrainian officials held talks with the US team in Riyadh. AFP reports that talks have recently wrapped up.
• The US has been looking to push for a full maritime ceasefire in the Black Sea as a step towards a more widespread peace accord. However, Russia has spoken only of a resumption of the Black Sea Grain Initiative, a plan from earlier in the war that sought to allow grain and fertiliser cargoes to traverse the Black Sea unmolested. 

TURKEY: CHP Ldr Meets w/Imamoglu After Saying Today's Rally The Last (For Now)

Main opposition centre-left Republican People's Party (CHP) leader Ozgur Ozel is currently meeting with imprisoned Istanbul Mayor Ekrem Imamoglu for the first time since the latter's detention. The meeting comes as the CHP says that its next rally in Sarachane will be the final one organised by the party at this time. Mass protests have been seen in several cities, but concentrated in Istanbul, following the arrest of Imamoglu on charges of corruption. The crackdown has also seen other opposition politicians, journalists critical of the gov't, and businessmen arrested. 

• The BBC reports that CHP lawmakers will hold their regular parliamentary meeting in Istanbul, rather than Ankara, at 1330 local time (1030GMT, 1130CET) today. Turkish outlet Sozcu reports that the CHP Party Assembly will meet on Thursday in Ankara at 1130 local time (0830GMT, 0930CET) to discuss Imamoglu's arrest, as well as the internal processes following the incarcerated mayor's selection as CHP presidential candidate in the 23 March primary election.
• President Recep Tayyip Erdogan has strongly criticised the protests, calling the gatherings "evil" and accusing the CHP of organising a "movement of violence".
• Without the CHP's backing, the protests appear unlikely to develop into a sustained movement that could put significant pressure on the Erdogan administration. 

US TSY FUTURES: Net Short Setting Most Prominent On Monday

OI data points to net short setting in most contracts during Monday’s downtick in futures, with the broader theme only interrupted by modest net long cover in TY futures.

• The largest net DV01 equivalent positioning swing came via short setting in US futures.

STIR: Short Setting Seen In Most SOFR Futures On Monday

OI data points to net short setting in most SOFR futures on Monday, as contracts ticked lower.

• Pockets of net long cover were seen through the blues, but the short setting dominated in net pack terms.

EUROPE ISSUANCE UPDATE:

France syndication: Spread set

• EUR Benchmark tap (MNI expects E3-4bln) of the 0.95% Jul-43 OATei. Spread set at 1.80% OATei RY +10bps (Guidance was + 12bps area), Books in excess of E37bln (inc E2.8bln JLM interest).

Netherlands auction results

• E1.99bln of the 2.50% Jul-35 DSL. Avg yield 3.011%.

UK auction results

• GBP2bln of the 4.75% Oct-43 Gilt. Avg yield 5.232% (bid-to-cover 2.97x, tail 0.5bp).

Germany auction results

• E4.5bln (E3.431bln allotted) of the 2.40% Apr-30 Bobl. Avg yield 2.44% (bid-to-offer 1.43x; bid-to-cover 1.87x).

AUSTRALIA: Surprise Income Tax Cut in Pre-Election Budget

Details of that Australian budget release - surprise tax cut, slightly wider deficit vs. Exp

• The budget release surprisingly includes a tax cut - that'll be phased in its introduction: the lowest rate of income tax is to drop by 1ppts to 15% by mid-'26, and then again to 14% by mid'27 (that tax bracket captures those earning A$18,201 - 45,000), allowing the government to state that "every" taxpayer will receive a tax cut both next year, as well as the year after that.
• The total cost of this tax tweak (as well as some other measures) equates to A$17bln. Deficit numbers are projected slightly wider than exp: A$42.1bln through Jun'26 vs. Exp. A$40bln.
• AUD marginally favoured on the back of the release - but ranges well-respected. AUD/USD back to unchanged. Worth recalling this is very much a pre-election budget, with the current government set to call an election by May 17th of this year. Opinion polling is currently too close to call.

FOREX: AUD Off Lows as Budget Looks to Lower Taxes

• Currency markets are mixed early Tuesday, with a small part of the recent JPY dip partially reversing and the USD Index broadly unchanged. This keeps tariff risk front and centre, as markets continue to look to gauge the extent to which the White House could narrow the scope of 'Liberation Day' tariffs next week.
• Scandi currencies remain firm and among the best performers YTD, with USD/SEK still well within reach of the 10.00 handle as European equities continue to gather poise and Germany's DAX builds a base to target the yearly highs.
• AUD recovered off early European lows, having underperformed alongside NZD for much of the session. The pre-election budget unveiled by the Labor government disclosed an income tax cut in both the next two fiscal years, and a minimally wider budget deficit. AUD/USD remains anchored to the 50-dma in the short-term, but AUD/NZD continues its recovery off lows: 1.1011 is the next major upside level.
• US new home sales and March consumer confidence data are the calendar highlights, with appearances from Fed's Kugler & Williams, ECB's Holzmann, Vujcic & Nagel. 

OPTIONS: Expiries for Mar25 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0850(E1.2bln), $1.0900(E1.2bln)
• GBP/USD: $1.2835(Gbp578mln)
• AUD/USD: $0.6255-65(A$674mln), $0.6350-60(A$1.1bln)
• USD/CAD: C$1.4550($631mln)

COMMODITIES: Bearish WTI Future Trend Intact Despite Latest Gains

• Despite recent gains, a bearish trend condition in WTI futures remains intact. However, a key pivot resistance at $69.12, the 50-day EMA, has been pierced. A clear breach of this hurdle would strengthen a bullish theme and open $70.98, the Feb 25 high. For bears, a reversal lower would expose the bear trigger at $64.85, the Mar 5 low. Clearance of this level would resume the downtrend and open $63.73 next, the Oct 10 ‘24 low.
• A clear uptrend in Gold remains intact and last week’s resumption of the bull cycle reinforces current conditions. The yellow metal is holding on to the bulk of its recent gains. Last Thursday’s fresh trend high reinforces the bull theme and sights are on $3079.2 next, a Fibonacci projection. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend and positive market sentiment. Support is at $2964.9, the 20-day EMA.

EQUITIES: Medium-Term Trend Direction in Eurostoxx 50 Futures Points Up

• The medium-term trend direction in Eurostoxx 50 futures is up and short-term weakness is considered corrective. Support to watch is the 50-day EMA, at 5288.25. It has recently been pierced. A clear break of it would highlight a stronger short-term bear threat and suggest scope for a retracement towards 5160.00, the Feb 4 low. The bull trigger is 5516.00, the Mar 3 high. Clearance of this level would resume the uptrend.
• The trend condition in S&P E-Minis is bearish and the latest recovery appears corrective. MA studies are unchanged - they remain in a bear-mode set-up, highlighting a dominant downtrend. However, Monday’s gains resulted in a breach of the 20-day EMA, at 5803.08. This signals scope for a continuation higher near-term - towards 5864.25, the Jan 13 low. A reversal lower would refocus attention on 5559.75, the Mar 13 low and bear trigger.

Date	GMT/Local	Impact	Country	Event
25/03/2025	0900/1000	***	DE	IFO Business Climate Index
25/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
25/03/2025	1100/1100	**	GB	CBI Distributive Trades
25/03/2025	1230/0830	**	US	Philadelphia Fed Nonmanufacturing Index
25/03/2025	1240/0840		US	Fed Governor Adriana Kugler
25/03/2025	1255/0855	**	US	Redbook Retail Sales Index
25/03/2025	1300/0900	**	US	S&P Case-Shiller Home Price Index
25/03/2025	1300/0900	**	US	FHFA Home Price Index
25/03/2025	1300/0900	**	US	FHFA Home Price Index
25/03/2025	1305/0905		US	New York Fed's John Williams
25/03/2025	1400/1500	**	BE	BNB Business Confidence
25/03/2025	1400/1000	***	US	New Home Sales
25/03/2025	1400/1000	***	US	Conference Board Consumer Confidence
25/03/2025	1400/1000	**	US	Richmond Fed Survey
25/03/2025	1700/1300	*	US	US Treasury Auction Result for 2 Year Note
26/03/2025	0030/1130	***	AU	CPI Inflation Monthly
26/03/2025	0700/0700	***	GB	Consumer inflation report
26/03/2025	0700/1500	**	CN	MNI China Money Market Index (MMI)
26/03/2025	0745/0845	**	FR	Consumer Sentiment
26/03/2025	0800/0900	**	SE	Economic Tendency Indicator
26/03/2025	0800/0900	***	ES	GDP (f)
26/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
26/03/2025	1100/0700	**	US	MBA Weekly Applications Index
26/03/2025	-		GB	OBR Spring Forecasts
26/03/2025	1230/0830	**	US	Durable Goods New Orders
26/03/2025	1230/1230		GB	Chancellor Reeves to deliver Spring Statement
26/03/2025	1330/1330		GB	DMO to announce FY25/26 financing remit (approx time)
26/03/2025	1400/1000		US	Minneapolis Fed's Neel Kashkari
26/03/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
26/03/2025	1530/1530		GB	DMO agenda for quarterly consultation
26/03/2025	1530/1130	**	US	US Treasury Auction Result for 2 Year Floating Rate Note
26/03/2025	1700/1300	*	US	US Treasury Auction Result for 5 Year Note
26/03/2025	1710/1310		US	St. Louis Fed's Alberto Musalem
26/03/2025	1730/1330		CA	BOC Meeting Minutes
26/03/2025	1800/1900		EU	ECB's Cipollone in panel on Digital Finance