STIR: Net Hawkish Reaction To Powell For Near-Term Rates
Apr-04 16:08
- US rates shifted back to a net hawkish reaction during Powell's Q&A, which has now concluded, at least for rates through mid-2026, after oscillating since the text release (hawkish, then pared and then hawkish again with SFRZ5 in an 8.5 tick range post-release).
- It came with "We are well positioned to wait for greater clarity before considering any adjustments to our policy stance” from the text before the Q&A’s “it feels like we don't need to be in a hurry [to cut]. It feels like we have time."
- SFRM5 and U5 leads the increases in implied yields post Powell release (+5bp) with a pivot to slightly lower post-Powell yields from the U6 onwards.
- Whilst firmly off earlier lows, the terminal implied yield at 2.98% is still 16bp lower on the day (in the U6).
- Fed Funds cumulative cuts from assumed 4.33% effective: 10bp May (vs 13bp pre-Powell), 31.5bp Jun (vs 35.5bp), 56bp Jul (vs 59.5bp) and 104bp Dec (vs 106.5bp).
- The larger move off lows came earlier, aided by solid payrolls but more notably some optimism of a softening in tariff stance from Trump’s Vietnam discussions and Fox’s Gasparino’s “scoop” shortly before Powell took to the stage.
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PORTUGAL: No Confidence Vote Will Not Succeed Without PS Backing
Mar-05 15:56
Prime Minister Luis Montenegro has confirmed that he will move forward with a confidence motion in his gov't. The vote will effectively prove a piece of political theatre rather than a sincere attempt to draw out the opposition after the centre-left Socialist Party (PS) confirmed that it would abstain. The remaining opposition parties hold fewer seats than the minority centre-right Democratic Alliance (AD) led by Montenegro.
- The censure vote, the second in under two weeks, comes amid a scandal involving Montenegro's family-owned firm Spinumviva. In late-Feb Expresso reported that the Solverde Casinos and Hotel group pays Spiunumviva EUR4,500/month for compliance and consumer protection services. Two casino concessions currently held by Solverde have to be renewed by the gov't in 2025. In an effort to downplay the story, Montenegro confirmed in an address on 1 March that Spinumviva was now wholly under the control of his children.
- It remains to be seen whether the minority gov't can weather the storm. Opinion polling shows little change in support for the AD, PS or the right-wing nationalist Chega! since the March 2024 election. As such, Pedro Nuno Santos' PS may seek to draw out the issue to see if it can significantly damage Montenegro's standing rather than ousting the gov't immediately and risking another hung parliament.
US: CANADA: Trudeau Will Reject Unfavourable Compromise On Tariffs - Bloomberg
Mar-05 15:55
Bloomberg reporting that Prime Minister Justin Trudeau will not lift retaliatory tariffs on the US unless President Donald Trump removes a 25% tariff imposed on Canadian imports on Tuesday morning. The report comes after comments from Commerce Secretary Howard Lutnick raised optimism that a deal could be struck on partial tariff relief during a call between Trump and Trudeau today.
- Lutnick told Bloomberg Television Trump is mulling temporary relief: "...our expectation is that it'll be categories... It will be 25 percent but it'll be, there will be some categories left out. It could well be autos, could be others as well,"
- A Canadian government official said Trudeau would oppose a 'middle ground' floated by Lutnick that would only offer a partial rollback of American tariffs, continuing a hawkish posture from Ottawa since the tariff announcement.
- Lutnick, and Trump's key trade advisor Peter Navarro, have both stressed that the measures against Canada and Mexico are fentanyl measures rather than trade measures, leading to optimism that action on the border will lead to another reprieve from tariffs. However, the bar set by Lutnick appears difficult to achieve in the short-term: “We need to see material reduction in autopsy deaths from opioids…"
- WSJ notes: "Trump hasn't, so far, indicated he plans to roll back either the taxes on Canadian and Mexican imports, or the extra 10% tax on Chinese goods," adding he, "would move forward with his plan on reciprocal tariffs, adjusting U.S. levies to match those of other countries."
US TSY OPTIONS: Corporate Bond Update: Republic of Armenia 10Y Launched
Mar-05 15:48
- Date $MM Issuer (Priced *, Launch #)
- 03/05 $Benchmark Mars 2Y +75a, 3Y +85a, 5Y +100a, 7Y +110a, 10Y +120a, 20Y +135a, 30Y +145a, 40Y +155a
- 03/05 $1.5B Axon 5NC2, 8NC3
- 03/05 $1B *KommuneKredit WNG 5Y SOFR+44
- 03/05 $750M #Republic of Armenia 10Y 7.1%
- 03/05 $500M Acadia Health 8NC3
- 03/05 $500M Forestar Group 8NC3
