US TSYS: Retracement Of Prior Gains Consolidated Ahead Of Payrolls

Gov't spox Sophie Primas has said that the French administration is expecting "powerful" tariffs from US President Donald Trump, coming in the range of 20-25%. Primas' comments come as Minister Delegate for Labour and Employment Astrid Panosyan-Bouvet said on France 2 TV that instead of the 0.9% economic growth forecast in the budget just two months ago, “We are at more like 0.7%, which are the Bank of France forecasts, absolutely,”

• On 1 April, Finance Minister Eric Lombard, speaking to parliament, said regarding the looming impact of US tariffs, “We are indeed in a delicate economic situation, [...] We are being extremely careful to continue with measures of simplification and support for activity to confront these challenges.” He gave no indication of the exact details of any response.
• Further fiscal changes could put pressure on the minority gov't of PM Francois Bayrou. The 2025 budget, involving spending cuts and tax hikes, was already broadly unpopular with most of the main left-wing New Popular Front alliance and the far-right Rassemblement National (RN, National Rally).
• Further measures intended to bolster France's fiscal outlook and avoid market jitters could spark more political backlash. A snap parliamentary election cannot take place until July. The febrile political atmosphere in France following the conviction of RN figurehead Marine Le Pen and the ban on her running for the presidency in 2027 could add to the gov'ts headaches. The RN has sometimes abstained on votes, allowing the gov't to remain in place. There is no guarantee this situation is maintained. 

J.P.Morgan recommend buying the 3.25% Jun-27s vs the 1.375% Dec-28s as “an attractive way to add exposure to a steeper 2s/5s curve with additional relative value”.

• They note that “if activity data begin to show evidence of a material softening in the economy, negative level/curve directionality should begin to reassert itself”.
• They also highlight that specific micro curve “has flattened even more dramatically than the broader curve”.

• Treasuries have more than reversed losses seen with the Asia open, leaving them more firmly back within yesterday’s range.
• Risk-off flow in European hours helped, eliciting screen buying across TU, FV and TY futures ahead of the European cash equity open, before a further rally on headlines that China is to restrict companies from investing in the US.
• This all comes ahead of “Liberation Day” tariff announcements due 1600ET, although futures volumes have still been reasonably elevated overnight despite this upcoming event risk.
• Cash yields are 0.8-2.8bp lower, with declines led by 5s and 30s lagging the move.
• 2s10s at 29.3bp (+0.4bp) broadly consolidates the week’s flattening from 35bp early Monday.
• TYM5 has climbed 11 ticks off overnight lows back to 111-26 for just +01 on the day, on solid cumulative volumes of 465k.
• Yesterday’s high of 111-30+ marked another step closer to key resistance at 112-01 (Mar 4 high and bull trigger) after which lies 112-13 (Fibo projection). To the downside, support at 110-26+ (20-day EMA).
• Data: MBA mortgage data (0700ET), ADP employment Mar (0815ET), Factory orders Feb (1000ET)
• Fedspeak: Kugler on inflation expectations (1630ET, text + Q&A) – see STIR bullet
• Bill issuance: US Tsy $60B 17W bill auction (1130ET)