US 10YR FUTURE TECHS: (U5) Resistance Is Intact For Now

Bund futures have now more-than erased earlier losses, currently +10 ticks at 130.52. Initial resistance is Friday’s high at 130.65. 

• Although the move away from session lows started well before midday, topside momentum gathered pace after China said the US had undermined trade talks by warning against the use of Huawei’s Ascend chips. Fresh demand for USTs since the US cash equity open has lent further support, alongside the ongoing pricing of today's heavy corporate issuance calendar.
• 10-year EGB spreads to Bunds remain biased up to 1.5bps wider on the session, but are off earlier highs.
• Regional news flow has been relatively light and not market moving. The European Commission unsurprisingly revised its growth projections lower in its Spring forecast round. Meanwhile, the Eurozone final April HICP release confirmed that the acceleration in services inflation was driven by the timing of Easter, and will likely be temporary.
• The hawkish leaning Muller said that the ECB is “at the point of balance where there’d need to be clear reasons to go significantly beyond where we are right now to further stimulate the economy — and I think it’s still an issue for discussion whether those reasons are good enough today”. ECB-dated OIS are back to pricing 52bps of easing through year-end, little changed from Friday’s close.
• Tomorrow’s regional calendar includes the March Eurozone current account, flash May consumer confidence and several ECB speakers. 

NY Fed President WIlliams and Fed Governor Jefferson - both permanent FOMC voters - on Monday reiterated a desire to be patient on cutting rates. Williams was even more explicit than usual in offering a rough timetable, with broader FOMC communications continuing to suggest that a cut before the end of summer is not in the frame.

• Williams appeared to put a timeframe on when the Fed would have sufficient clarity to decide on rates: "It's not going to be that in June, we're going to understand what's happening, or July... it's going to be a process of collecting data, getting a better picture, and watching those things develop."
• This follows Atlanta's Bostic this morning saying "I think we’ll have to wait three to six months to start to see where this settles out" (he sees just 1 cut this year), and recall last month Gov Waller - who may be  the  biggest dove on the Committee - also said that we won't see the tariffs in the hard data "until July" given the April 2 tariffs have been postponed. Indeed the other biggest dove on the FOMC (and a 2025 voter), Chicago's Goolsbee, suggested that uncertainty may actually have grown as a result of the latest tariff climbdown and the bar to cuts remains high.
• This would seem to align with current market pricing: there's under 10% probability implied of a June cut, with under 40% cumulative through July - and even a cut by September is not quite a 100% proposition (closer to 90%).
• It also brings September's FOMC meeting back into focus as has been the case in previous years, including September 2024 when the Fed kicked off the easing cycle. The late August Jackson Hole Fed symposium will likely remain a key focus in setting the stage.
• Both Jefferson and Williams said policy is in a "good place" (Jefferson said it was in a "very" good place), with both eyeing risks from tariffs to both sides of the dual mandate with potential for slower growth and upped inflation. Williams called policy "slightly restrictive" (earlier this month he similarly categorized policy as "modestly restrictive").
• Jefferson's key comments: “I believe it’s important that monetary policy make sure that any increase in the price level is not converted into a sustained increase in inflation...We’re going to keep our policy in a position to keep expectations anchored, and we’re going to wait and see the eventual impact of the totality of policies... given the level of uncertainty that we’re facing right now, I believe that it is appropriate that we wait and see how the policies evolve over time and their impact."

• EUR/USD: $1.1015(E1.1bln), $1.1070-75(E1.8bln), $1.1100-05(E780mln), $1.1195-00(E1.5bln), $1.1245-50(E1.2bln), $1.1300(E1.1bln)
• USD/JPY: Y145.00($795mln), Y145.50($1.0bln), Y146.00($621mln)
• USD/CAD: C$1.3900-15($807mln)