MNI US MARKETS ANALYSIS - Tsys Softer, But Sell-Off Stalled

Highlights:

• Treasuries regain some poise, with 10 year yield just short of 4.40%
• With auto tariffs all but confirmed, markets await Trump's judgement on pharma
• Norges Bank decline to begin easing cycle, although NOK boost limited

US TSYS: Sell-Off Stalls With 10YY Just Shy of 4.40%, 2s10s Steepest Since Jan

• Treasuries have more than reversed initial gains with the open after growth negative impacts of latest tariff announcements on autos and pharma still to come originally set the tone in Asia trade.
• The intraday sell-off started in European hours but has stabilized with US desks filtering in along with reaching some notable levels.
• Today sees a heavy data docket at 0830ET plus 7Y supply and then Fedspeak later in the session.
• Cash yields are 1.2-4.1bp higher on the day, led by the long end.
• 10Y yields came close to hitting 4.40% for the first time since Feb 24, topping out at 4.3984% and currently 4.389%).
• 2s10s at 36.2bps (+2.3bp) is at its steepest since Jan 24.
• TYM5 trades at 110-07+ (-10+) off latest lows of 110-06, on solid cumulative volumes of 470k. The low tested support at 110-06 (50-day EMA), after which lies a key 110-00 (Feb 7 high) before 109-13+ (Feb 24 low). Resistance meanwhile is seen at 111-17+ (Mar 20 high).  
• Data: GDP/PCE revisions, Q4 third (0830ET), Weekly jobless claims (0830ET), Advance goods trade Feb (0830ET), Wholesale/retail inventories Feb p/Feb (0830ET), Pending home sales Feb (1000ET), KC Fed mfg Mar (1000ET)
• Note that the trade data are likely to see greater attention than usual – more on this here.
• Fedspeak: Barkin (1630ET), Collins (1630ET)
• Coupon issuance: US Tsy $44B 7Y Note auction - 91282CMT5 (1300ET). Yesterday’s 5Y saw a small 0.5bp tail along with its lowest bid-to-cover in nine auctions.
• Bill issuance: US Tsy $75B 4W & 8W bill auctions (1130ET)

STIR: Tariff Inflation Implications Outweigh Again, 60bp Of Fed Cuts For 2025

• Fed Funds implied rates initially faded the latest step towards 25% tariffs on autos (and further willingness re pharma tariffs) but have since moved higher in European trade.
• Near-term inflationary impacts are seen as more impactful, with the implied rate for the Dec meeting 1.5bp higher on the day now after a 4.5bp swing from overnight lows.
• Cumulative cuts from 4.33% effective: 4bp May, 16.5bp Jun, 28bp Jul, 42bp Sep and 60bp Dec.
• Today sees notable data updates including GDP/PCE revisions, jobless claims and advance trade.
• We also hear from two more FOMC members for the first time since last week’s FOMC and indeed since last month, both of whom talked about the need for caution back in February.  
  • 1630ET – Barkin (non-voter) gives lecture (text + Q&A). He said Feb 25 that "It makes sense to stay modestly restrictive until we are more confident inflation is returning to our 2 percent target…if headwinds persist, we may well need to use policy to lean against that wind."
  • 1630ET – Collins (’25 voter) in fireside chat on economy and mon pol (Q&A only). She last spoke back on Feb 3: "In my view…it's really appropriate for policy to be patient, careful, and there's no urgency for making additional adjustments, especially given all of the uncertainty, even though, of course, we're still somewhat restrictive”.

TARIFFS: Another Step Closer To Auto Tariffs, Awaiting Details On Pharma

• US President Trump late yesterday signed a proclamation to implement a 25% tariff on auto imports from Apr 3.
• If implemented, it will first target fully assembled vehicles before widening to include engines, transmissions and powertrain components amongst other key parts (which at least partly corroborates a WSJ report yesterday that the US was weighing excluding auto parts from tariffs).
• Both the focus on autos and proposed rate isn’t new – Trump had threatened auto tariffs of “about 25%” back on Feb 18 – but it demonstrates a greater willingness to push ahead with tariffs on important sectors after some hopes of a paring back in severity.
• Taking this from a European angle, the FT yesterday reported EU’s Sefcovic expecting broad Trump tariffs of about 20% after his visit to Washington on Tuesday.
• Our policy team had earlier reported an EU trade source as saying the EU has offered to cut tariffs on U.S. cars to zero and to build more pharmaceutical factories in the U.S. as it seeks to head off tariffs, or alternatively reduce its auto tariffs to the same level as the 2.5% imposed in the U.S. The same official noted that the “dialogue is still going. The door is not closed” but at the same time, "This will be the final analysis before Trump makes the final decision.”
• Whilst some might see potential for some backtracking ahead of the April 3 date considering these proposed terms (and Trump’s continuing focus on reciprocity), Trump also claimed the tariffs are “permanent” with no intention to make exceptions.
• Trump has also suggested further tariffs would be imposed on the EU and Canada if they worked together "to do economic harm" to the US, presumably provoked by new Canadian PM Carney's first trips being to Europe.
• A reminder that from an EU-wide perspective, it’s the still-threatened pharma tariffs (which have previously been touted at 25% or higher) that could be more impactful still than auto tariffs. EU exports of vehicles to the US were worth 0.3% of EU GDP in 2024 (or 0.2% GDP for net exports considering Trump has focused on trade imbalances) but that was 0.7% and 0.4% GDP respectively for pharmaceutical products.
• The opposite is true for Germany however, with vehicle exports to the US worth 0.8% GDP and net exports 0.6% GDP, exceeding pharma worth 0.6% GDP and 0.5% GDP.
• In either case, a pushing ahead of 25% tariffs on either or both of these sectors is a significant escalation from the 25% tariffs already enacted on steel and aluminium that came into play back on Mar 12 having first been touted Feb 10. 

US TSY FUTURES: Short Setting Most Prominent On Wednesday

OI data points to net short setting in the majority of Tsy futures during Wednesday’s downtick, most concentrated in TU & FV futures.

• Only modest net long cover in UXY & US futures interrupted the wider theme.

STIR: Short Setting Seen In Most SOFR Futures On Wednesday

OI data points to short setting providing the most prominent positioning impulse in SOFR futures on Wednesday, as most contracts ticked lower on the day.

• Only modest, isolated pockets of net long cover were seen.

GERMANY: US Auto Tariffs Put 0.18% Hit On German Growth, Kiel Institute Says

Auto tariffs of 25% announced by the US administration yesterday would hit German 2025 GDP by 0.18%, newspaper FAZ reports, quoting the Kiel Institute for the World Economy (IfW). "Overall, the export losses are limited, as cars are often produced close to their sales market." The analysis assumes no retaliation.

• EC President von der Leyen commented yesterday that the EU "will continue to seek negotiated solutions" on the US tariff matter - around one week would remain until the tariffs start to be implemented. However, French finance minster Lombard said that the "only possible answer to US tariffs is to raise our own tariffs" - highlighting the direction in which the debate will develop is still open.
• For comparison, MNI's collation of sellside analysts currently sees a median estimate for German GDP growth in 2025 of 0.2% - but at least some of the underlying forecasts might be already assuming a negative impact through US tariffs. The median was unrevised during the last month, and downwardly revised by 0.1pp during the two months prior.

EGB FUNDING UPDATE: Italy Q2 Funding Plan and MNI Expectations

Italy released its Q2 issuance programme on Wednesday. The MEF notes that E82bln was issued in January and February with a further E25bln expected in March. This leaves E225-245bln of gross issuance expected for Q2-Q4. We calculate that this equates to E332-352bln of gross issuance, broadly in line with the initial 2025 target of E330-350bln.

New issues expected in Q2 (up to 10-year):

• 7-year BTP maturing 15 July 2032 (minimum outstanding E10bln, MNI expect an April launch).
• 10-year BTP maturing 1 October 2035 (minimum outstanding E10bln, MNI expects a May launch).

Issues expected to be reopened in Q2 (up to 10-year):

• 2.55% Feb-27 BTP Short Term (minimum E9bln outstanding already exceeded).
• 3-year 2.65% Jun-28 BTP
• 5-year 2.95% Jul-30 BTP (minimum E10bln outstanding).
• 10-year 3.65% Aug-35 BTP (minimum E10bln outstanding already exceeded).

NORGES BANK: Didn't Want To Signal Hike Probability In March Rate Path

Looking into the details of the rate path a little closer, the “judgement factor” (i.e. the difference between the actual policy rate projection and model-implied projection) was dovish in Q2 2025, but hawkish across the remainder of the projection horizon.

• The Q2 model-implied rate pointed to a 34bps upward revision to the December path, above the 27bps revision that was delivered. This is because a 34bp upward revision would imply some probability of a hike in Q2 – something Norges clearly don’t want to signal. Instead, the 27bp upward revision to 4.49% is consistent with between a 20-45% implied probability of a 25bp cut in June (according to our initial calculations).
• Further out though, the “judgement factor” pushed up the model-implied rate path by 5-24bps through 2027 (the largest impact was in 2026).
• Unsurprisingly, prices and wages were the largest upward contributor to the rate path, owing to the recent uptick in inflationary pressures but also an upgrade to Norges Bank’s 2025 wage growth projection (4.5% vs 4.2% prior).
• The money market premium and external factors (i.e. foreign rates) also pushed the rate path higher, in line with analyst expectations.
• Despite the more optimistic signals in the Q1 Regional Network Survey, domestic demand pulled the rate path lower, especially in 2026. The report notes that “housing investment and household consumption have been weaker than projected in the previous Report and weaker than implied by the model’s relationships”. Analysts had generally expected domestic demand to be an upward contributor.
• The exchange rate also pulled down the path more than expected (by up to 18bps in Q2 2026), with Norges placing considerable weight on recent NOK strength.
• Petroleum price and investment pulled the rate path lower as expected.

MONTH-END FX: Most Models Point to USD Demand for Month-, Quarter-End

With today marking month-end (and quarter-end) value date, flow through the US crossover and into the 4pm WMR fix (earlier than usual for the US this quarter, at 1200ET) will take focus. Most models point to strong dollar buying for March, with EUR/USD sales among the most mentioned channels.

• Barclays see strong USD buying for month-end, and moderate USD buying for quarter-end, with a strong sign for EURUSD.
• BNY Mellon write that relative equity performance is providing the strongest signal, with EUR, NOK to see selling pressure, while USD, AUD and NZD are to benefit. They see EUR/USD selling as the most material flow.
• Credit Agricole signal mild USD buying across the board, with the strongest sell signal for USD/SEK. Their corporate model points to EUR buying for month-end and enter a trade to buy the USD against the G10 basket.
• Deutsche Bank see equity performance pointing to broad-based USD demand, with USD/NOK the standout pair. They look to fade post-Norges Bank USD/NOK weakness, and see USD demand standing out vs. SEK, NOK, AUD, NZD and EUR.

FOREX: GBP Smoothly Digesting Spring Statement, Month-End in Focus

• GBP marginally outperforms relative to the rest of G10, with the stability off lows for GBP/USD overnight largely responsible. Markets continue to digest the outcomes and implications of yesterday's Spring Statement, and the smooth passage via Gilt markets will be seen as a positive considering the notable bad reception for last Autumn's Budget.
• Today marks month-end value-date, meaning month-end flow will be a particular focus as the session progresses. US corporate demand for dollars may show through into the NY crossover should models prove correct - with USD demand seen likely for March.
• The Norwegian central bank opted against a rate cut this morning, despite signalling March as the opportune month to start their easing cycle for much of 2025. Building inflationary pressure and higher-than-expected CPI outturns in recent months are the primary culprit, prompting a sharp revision higher for year-end rate projections. While the statement certainly erred hawkish, the pricing for a cut today had dwindled into the decision, leaving EUR/NOK broadly flat on the session, erasing an early rally.
• Weekly jobless claims, tertiary Q4 GDP and the advance goods trade balance numbers are the data highlights Thursday - while the ECB schedule is particularly busy: ECB's de Guindos, Wunsch, Escriva & Schnabel are all set to speak - while Fed's Collins & Barkin appear just after the US close.

FOREX: AUDJPY Proving Resilient, Threatens Stronger Recovery

• Latest tariff developments, and the initial weakness for major equity indices, had little effect on AUDJPY late Wednesday, usually one of the best barometers of risk sentiment in FX. We flagged yesterday that the cross-asset price action with equities is another reminder that the intraday stocks x Cross/JPY correlation remains inconsistent.
• Coinciding with the key resistance for USDJPY noted above at 150.95, AUDJPY is also testing its 50-day EMA, which intersects ~95.20. Importantly, we have not closed above this average since January.
• A break above would mark a further signal that the bear phase off the year's high may have concluded. The cross would then quickly encounter downtrend resistance (drawn from the July ’24 high) around 95.50, and the March high at 95.75. Above here, the February highs at 97.33 would be a notable target for a more protracted recovery.
• Notably, AUD also shrugged off the softer-than-expected Australia CPI data this week, with the next calendar highlights being the Melbourne institute’s inflation gauge and retail sales, both due early next week.

OPTIONS: Expiries for Mar27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0750(E1.5bln), $1.0770-90(E719mln), $1.0800(E2.0bln), $1.0820-25(E1.4bln), $1.0850-65(E1.9bln)
• USD/JPY: Y150.00($684mln), Y155.00($902mln)
• GBP/USD: $1.2900(Gbp812mln)
• AUD/USD: $0.6220(A$717mln), $0.6450(A$771mln)
• USD/CNY: Cny7.2850($671mln)

EQUITIES: E-Mini S&P Moving Average Studies Remain in Bear Mode Set Up

• The medium-term trend direction in Eurostoxx 50 futures is up and recent short-term weakness - for now - appears corrective. Support to watch is the 50-day EMA, at 5295.60. 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.
• S&P E-Minis traded lower yesterday but for now, the contract remains closer to its recent highs. The trend condition is bearish and the latest recovery appears corrective. MA studies are in a bear-mode set-up, highlighting a dominant downtrend. Note that the 20-day EMA has been breached. 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.

COMMODITIES: Bearish WTI Future Trend Intact, Gains Considered Corrective

• Despite recent gains, a bearish trend condition in WTI futures remains intact, and gains are considered corrective. However, a key resistance at $69.14, the 50-day EMA, has been pierced. The breach of this hurdle strengthens a bullish theme and opens $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, the Oct 10 ‘24 low.
• The trend condition in Gold is unchanged, it remains bullish and the yellow metal is holding on to the bulk of its recent gains. Last week’s fresh trend high reinforces the bull theme and sights are on $3079.2 next, a Fibonacci projection. Note that moving average studies remain in a bull-mode position, highlighting a dominant uptrend and positive market sentiment. Support is at $2974.8, the 20-day EMA.

Date	GMT/Local	Impact	Country	Event
27/03/2025	1230/0830	*	CA	Payroll employment
27/03/2025	1230/0830	***	US	Jobless Claims
27/03/2025	1230/0830	**	US	WASDE Weekly Import/Export
27/03/2025	1230/0830	***	US	GDP
27/03/2025	1230/0830	**	US	Advance Trade, Advance Business Inventories
27/03/2025	1300/1400		EU	ECB's De Guindos at 2025 IIF European Summit
27/03/2025	1400/1000	**	US	NAR Pending Home Sales
27/03/2025	1430/1030	**	US	Natural Gas Stocks
27/03/2025	1500/1100	**	US	Kansas City Fed Manufacturing Index
27/03/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
27/03/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
27/03/2025	1700/1300	**	US	US Treasury Auction Result for 7 Year Note
27/03/2025	1740/1840		EU	ECB's Schnabel lecture on MonPol Transmission
27/03/2025	1805/1905		EU	ECB's Lagarde prerecorded message for Women in Finance conference
27/03/2025	1900/1500	***	MX	Mexico Interest Rate
27/03/2025	2030/1630		US	Richmond Fed's Tom Barkin
27/03/2025	2030/1630		US	Boston Fed's Susan Collins
28/03/2025	2330/0830	**	JP	Tokyo CPI
28/03/2025	0700/0800	*	DE	GFK Consumer Climate
28/03/2025	0700/0800	**	SE	Retail Sales
28/03/2025	0700/0700	***	GB	Retail Sales
28/03/2025	0700/0700	*	GB	Quarterly current account balance
28/03/2025	0700/0700	***	GB	GDP Second Estimate
28/03/2025	0700/0700	**	GB	Trade Balance
28/03/2025	0745/0845	**	FR	PPI
28/03/2025	0745/0845	**	FR	Consumer Spending
28/03/2025	0745/0845	***	FR	HICP (p)
28/03/2025	0800/0900	***	ES	HICP (p)
28/03/2025	0800/0900	**	CH	KOF Economic Barometer
28/03/2025	0830/0930		EU	ECB de Guindos At Fed. of Female Professionals Conf
28/03/2025	0855/0955	**	DE	Unemployment
28/03/2025	0900/1000		IT	Business and Consumer confidence
28/03/2025	0900/1000	**	EU	ECB Consumer Expectations Survey
28/03/2025	1000/1100	*	EU	Consumer Confidence, Industrial Sentiment
28/03/2025	1100/1200	**	IT	PPI
28/03/2025	1230/0830	***	US	Personal Income and Consumption
28/03/2025	1230/0830	***	CA	Gross Domestic Product by Industry
28/03/2025	1400/1000	***	US	U. Mich. Survey of Consumers
28/03/2025	1400/1000	**	US	University of Michigan Surveys of Consumers Inflation Expectation
28/03/2025	1500/1100		CA	Finance Dept monthly Fiscal Monitor (expected)
28/03/2025	1615/1215		US	Fed Governor Michael Barr
28/03/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
28/03/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
28/03/2025	1930/1530		US	Atlanta Fed's Raphael Bostic