US: President Trump's State Of The Union Address Underway Shortly 2/2
Trump is likely to address tensions with Iran in a portion of the speech outlining his “peace through strength” strategy. Based on recent public statements, Trump is likely to impress on Tehran the importance of reaching a nuclear deal and warn of dire consequences absent an agreement.
- Today is the fourth anniversary of the Russian invasion of Ukraine. Bloomberg reported overnight that Trump is pushing for a ceasefire ahead of US Independence Day celebrations on July 4. With Russia unwilling to budge on hardline demands, Kyiv will be concerned that Trump will intensify pressure on Ukraine to make the bulk of the compromises. Any comments from Trump will be closely scrutinised, with Russia hawks in the Senate reporting increased momentum for new sanctions on Moscow.
- Frontline Republicans may be disappointed if they are expecting Trump to outline a detailed blueprint to address affordability ahead of November’s midterm elections. The Economist writes, “Viewers may end up more, not less, confused about where he is taking America...”
- WSJ reports, “He is planning to call on Congress to pass legislation codifying the healthcare framework... which calls for redirecting federal subsidies from insurers to consumers. [Republicans] have so far shown little interest in taking it up during a midterm election year.”
- According to the Journal, Trump will also announce plans to force tech firms to pay increased electricity costs in communities where AI data centers are being built.
- Semafor reports that Trump "is exploring its options to create a retirement savings plan for workers who don’t have an employer-provided one without going through Congress...”
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US TSYS: JGBs Lead UST Futures Higher Again
US futures opened stronger following the strength of JGBs into the close Friday and this momentum continued today. With JGB futures up strongly and the JGB10-Yr down -3bps, US bond futures are up across all maturities with the 10-Yr at 111-26+, up of +04+ from the open.
Cash yields are lower by -0.2bps to -0.8bps with the long end the best performers.
- The 2-Yr is at 3.594% down -0.2bps
- The 5-Yr is at 3.821% down -0.5bps
- The 10-Yr is at 4.219% down -0.8bps
- The 30-Yr is at 4.820% down -0.7bps.
The impact from JGBs may be foreign to some investors, unused to seeing inflation in the Japanese economy. With inflation looking entrenched in Japan and the potential for further fiscal spend, the usually low correlation between JGBs and USTs has changed, with USTs reacting to the JGB move.
In a week where US yields often trade sideways ahead of FOMC, this week eyes could be turned to TOKYO ahead of the FED decision.
CHINA: Central Bank Withdraws CNY7.8bn via OMO
Having showed signs of stabilizing mid week last week, repo rates rose into the end of the week, yet despite this Monday saw a modest withdrawal of liquidity via the PBOC. The maturity schedule for the week ahead is in excess of CNY1tn
- The PBOC issued CNY150.5bn of 7-day reverse repo at 1.4% during this morning's operations.
- Today's maturities CNY158.3bn.
- Net liquidity withdrawal CNY7.8bn.
- The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.52%, from prior close of 1.49%.
- The China overnight interbank repo rate is at 1.54%, from the prior close of 1.41%.
- The China 7-day interbank repo rate is at 1.60%, from the prior close of 1.49%.
MNI: CHINA PBOC CONDUCTS CNY150.5 BLN VIA 7-DAY REVERSE REPO MON
- CHINA PBOC CONDUCTS CNY150.5 BLN VIA 7-DAY REVERSE REPO MON
