BUNDS: Testing Monday's high

Scandi currencies notably underperform the G10 this morning, with risk sentiment souring amid fresh global growth concerns. Weak Brent crude and natural gas price action has provided an additional headwind to the NOK, leaving NOKSEK down 0.3% today at ~0.9270. A clear break of the November 2020 low at 0.9274 would expose the 76.4% retracement of the March 2020 - March 2022 bull leg at 0.9147 as next support.

• EURNOK is up 1.4% on the session, after breaching trendline resistance drawn from the August 2024 high at 11.7185 on Friday. The psychological 12.0000 handle was pierced earlier before the rally faded. This level remains the initial resistance.
• USDNOK has rallied ~5.5% from last Thursday’s close, with the pair now trading above the 50-day EMA for the first time since March 4.
• For SEK, there will be heightened interest around tomorrow’s Riksbank speeches from Bunge (0645BST) and Thedeen (1230BST). Although the March decision and minutes suggested the current policy rate of 2.25% was an appropriate reflection of the upside and downside risks to the inflation outlook, the Board emphasised a clear readiness to act if the outlook changes.
• The sharp reversal in spot rates over the past two sessions has been reflected in options markets, with the vol premium for 3-month calls over puts spiking higher in Scandi crosses against both USD and EUR.
• This week’s Scandinavian data calendar is headlined by Norwegian March inflation on Thursday. Swedish February activity data (Thursday) and final March CPI (Friday) are also due. 

TY futures close their opening gap higher as equities tick higher (the latter move has been covered in recent bullets). 10+-Year Tsy yields now 1-4bp higher on the day, with the curve twist steepening. Bund and gilt futures remain above late Friday levels.

• Fed Funds implied rates are firmly off overnight lows, paring a sharp move lower at the open after Trump’s weekend tariff rhetoric including: “I don’t want anything to go down. But sometimes you have to take medicine to fix something.”
• Most recent intraday increases have been helped by Italy pointing to a potential delay in EU tariff retaliation.
• Cumulative cuts from an assumed 4.33% effective: 16bp May, 40.5bp Jun, 66bp Jul and 112bp Dec.
• The rate path for 2025 meetings is still solidly lower on the day but roughly back to levels seen prior to Friday’s payrolls report, some at-the-time tariff optimism and a patient sounding Fed Chair Powell [see comparison table below].
• Inter-meeting cut odds have been pared back to 2bp of cuts priced in the April FF contract vs closer to 6.5bp of cuts early this morning.  
• Further out the curve, SOFR implied yields are still seen bottoming in the SFRU6, off lows but at 2.95% still 11.5bp lower from Friday’s close and ~45bp lower since “Liberation Day” tariffs.
• Ahead, Fed Gov. Kugler (permanent voter) speaks on inflation dynamics and the Phillips curve (1030ET – Q&A only). She said Apr 2 before the Liberation Day announcements that the Fed should hold rates as long as inflation upside risks continue and that data suggest progress toward 2% inflation may have stalled. The tariff threat could be longer if longer-term inflation expectations rise.