JGBS: Bear-Steepener, Japan Gears Up For Trade Talks
Apr-14 01:11
In Tokyo morning trade, JGB futures are slightly weaker, -5 compared to settlement levels, after reversing early gains.
- “Japan is gearing up for trade negotiations with the United States that will likely touch on the thorny topic of currency policy, with some officials privately bracing for Washington to call on Tokyo to prop up the yen.” (per RTRS)
- “Prime Minister Shigeru Ishiba on Friday set up a task force to oversee trade negotiations with the United States, headed by his close aide and Economy Minister Ryosei Akazawa, who domestic media said will visit Washington next week.”
- Cash US tsys are flat to 3bps richer, with a steepening bias, in today’s Asia-Pac session after Friday’s heavy session. Last week, the US 10-year yield rose almost 50bps in 5 days, one of the biggest moves in that number of days since 1998.
- Cash JGBs are 1-4bps cheaper across benchmarks, with a steepener curve. The benchmark 10-year yield is 1.3bps higher at 1.337% versus the cycle high of 1.596%.
- Swap rates are 1-5bps higher. Swap spreads are wider.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
