FOREX: Japanese Yen Weakness Stands Out Amid More Stable Markets

 MNI looks ahead to talks among senior EU officials on defence finance options. -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com

• The Atlanta Fed’s GDPNow is unrevised at a rounded -1.8% annualized for Q1 from -1.8% with the Mar 18 update (technically revised down from -1.76% to -1.81%).
• The first formal estimate of the gold-adjusted figure came in at +0.2%, maintaining a 2pp gap seen in LinkedIn estimates from GDPNow’s Higgins earlier in the month as we suspected would be the case.
• A reminder that final sales to domestic purchasers are seen adding 1.55pps to GDP growth, no way near the deterioration seen in tracked GDP growth but still a notable moderation after a strong 3.0pp in Q4 and a particularly firm 3.7pp in Q3.
• The private version of this domestic demand measure tells a similar story, currently tracking a 1.2pp contribution after 2.6pp in Q4 and 2.9pp in Q3.
• Tomorrow’s advance trade data can give an idea of latest gold adjustment tweaks but we don’t think they can be actually factored into calculations until the full release on Apr 3.
• The next GDPNow update will be on Fri, Mar 28.
• As noted earlier, looking through some of these impacts rather than the more mechanical Atlanta Fed GDPNow approach, GS for example see Q1 real GDP tracking at 1.3% annualized. That’s still a sizeable moderation from the 2.35% in Q4 and 3.1% in Q3.

Treasury comes to market Wednesday at 1300ET with an auction of the 5Y Note for $70B (CUSIP: 91282CMU2)

• The 5Y has seen the most consistently solid auctions among nominal coupons, with the last four consecutive sales trading through the when-issued yields.
• That includes a particularly strong sale on Feb 25, which saw a 5-month low high yield of 4.123% for a 1.1bp trade-through. That was one of the strongest 5Y auctions in years, with primary dealers taking down just 10.6%, lowest since May 2023.
• The current when-issued yield is 4.09%, which would be a 6-auction low high yield (Sep 2024 3.519%).
• The 5-auction average result is a trade-through of 0.1bp (dragged down by the 1.6bp tail in October), with bid-cover consistently in the low 2.40s (2.41x average) and primary/indirect/direct takeup of 11.9%/69.1%/19.0%.
• From a relative value standpoint, 5s are trading slightly richer on the 2s5s7s butterfly compared with just before last month's auction  (-5.0bp vs -2.8bp), though overall the 5Y has cheapened on this basis since Fed rate cuts started in September 2024 (was -30bp) as 2s5s have steepened 28bp.
• It's a richer segment when considering the longer end of the curve however: 5s30s have steepened more than 18bp since last month's 5s auction.