Americas Breakfast Briefing

US OPEN/EVENTS AHEAD

USTs richer from the start of Asia-Pac trade as yields gapped lower across the curve. The benchmark yield fell to a 4.1823% low (-7bp) at the London open, before marginally arresting the drop. This still someway from the ytd low around 4.10%. There are a mixture of issues. Tariffs a clear weight, but running in parallel, DOGE efforts to cut the federal workforce. Both representing economic growth drags, exemplified by the 20bp real yield drop since last Thursday's high. The 10yr real yield as low as 1.8127% today, a clear breach of the recent range, 12bp under the 200-dma and around 6bp off the 2025 nadir. That the BEI is back to flat today speaks to the growth aspect of the overnight move as we head towards 'Liberation Day'. That in itself will ostensibly allow the market to more fully incorporate trade war fallout, however, such are the whims of the current administration, that uncertainty will remain elevated, whatever is announced. There is plenty to undermine consumer and business confidence alike.

After Friday's 2% clattering, SPX minis (-0.9%) indicate risk assets will take another hit at the cash open with tech especially under the cosh (Nasdaq minis -1.25%). WTI came within 10c of a multi-week high, topping at $70.14.

Just the Dallas Fed manufacturing activity index (15.30GMT) for March on the docket (no FOMCers) likely improved to -5 from -8.3 prior. The comments section probably of most interest. Partisan politics is rife within sentiment indices and today's fare could offer an insight into partisan business thinking.

• With the bounce from 175.1 (4 March YTD low) capped by 201.8/201.6 (18/27 March highs), the broader downtrend from 234.5 (10 January, 14-month high) has started to resume
• Studies deteriorate amid today's loss of 186.2 (20 March low) and scope builds for a return to 175.1, under which exposes 172.0/169.4 (8/11 October lows and 76.4% retrace of 149.3/234.5)
• Loss of the latter would then expose 164.9 (26 September former high), perhaps 149.3 (2024 low - 18 September)
• We'd need a decisive return above 201.8 to avert the mounting downside threat and allow further recovery to 210.7/215.9 (19/12 February highs)

EUROPEAN ROUND UP

Jun25 Gilts outperformed, hovering 10-12 ticks under today's best, which is 8 ticks under the next upside target of 92.18. The UK 10yr yield has slipped 4bp to a 11-day nadir of 4.6471%. Bunds trades around the middle ground of today extremes of 129.04-129.59. The German 10yr yield also down 4bp to 2.6832% and 3bp above today's worst. OATs underperform (although remain in the green) after falling to higher-low of 122.98 (+12 ticks). BTPs hover roughly 4 ticks above this morning's bottom of 117.78 (+22 ticks). Equity markets taking a beating ahead of 'Liberation Day', with the majority having declined over 1%. Dax leads the way lower (-1.81%). Brent sits around 38c under today's best of $74.47. Gold rose to a record high of $3127. Note, Trump threatened "secondary tariffs" on buyers of Russian oil is Putin refuses a ceasefire with Ukraine. On tariffs, there are also reports that the European Commission is working on a "term sheet" that will set out areas for negotiations, which could lead to lowering of the EU's own duties, mutual investments with the US and the easing of certain regulations and standards.

The latest from the ECB saw President Lagarde note that the central bank must continue to analyse data and maintaining a "constant battle" to reach the 2% inflation target, citing uncertainty from the US' trade policy. On the latter, she highlighted an opportunity for Europe to gain independence in areas like finance and energy. ECB Panetta warned that rising global uncertainty requires a careful approach to lowering rates further.

On the data-front, Italian national CPI accelerated to 2% y/y, with the HICP reading rising above target for the first time in 18 months to 2.1% y/y. Still, core CPI was steady at 1.7% y/y, keeping the deceleration trend in situ. In Germany local CPI for March was largely mixed, although there were no big increases/decreases of note. The national print is out this afternoon (13GMT), which is expected to ease a touch to 0.3% m/m from 0.4% and 2.2% y/y from 2.3%. HICP is also forecast to ease a tad to 0.4% m/m from 0.5% and to 2.4% y/y from 2.6%. CBers still to speak include the Riksbank's Breman (17GMT) and Norges Bank Dep Gov Longva. Nothing on the supply front.

• Extends the pullback from 2.940 (2025 peak - 12 March) via 2.833 (25 March minor lower high) to re-test 2.653/2.654 (14 January former high and 5 March low)
• Studies deteriorate and a downside break risks 2.564 (20 February former high), perhaps 2.507 (4 March high/gap low), before we see a rebound
• We'd need a return above 2.833 to refresh the broader uptrend for 2.940 and potentially key resistance at 3.026 (2023 peak - 4 October)

MARKET HEADLINES

• Cash USTs richen aggressively, led by the short-end.
• Risk-off environment ahead of 'Liberation Day' this week, as concerns grow that Trump's tariffs could stoke inflation and cause a sharp growth slowdown in the US.
• Global equity futures take a beating. Asia cash equity in the red, Nikkei down over 4%.
• US VP Vance: Greenland would be "much more secure" if it partnered with the US
• Trump threatened "secondary tariffs" on buyers of Russian oil is Putin refuses a ceasefire with Ukraine.
• Trump also threatened to punish Iran with secondary tariffs" and raised the threat of bombing the country until it signs a deal that renounces nuclear weapons.
• Germany’s FinMin Kukies warned about the impact of tariffs and said that Berlin was working to prevent an escalating trade war.
• Reports that the European Commission is working on a "term sheet" that will set out areas for negotiations, which could lead to lowering of the EU's own duties.
• EGB debt futures higher, Gilts outperform
• ECB Lagarde: the CB must continue to analyse data and maintaining a "constant battle" to reach the 2% inflation target, citing uncertainty from the US' trade policy.
• ECB Panetta: rising global uncertainty requires a careful approach to lowering rates further.
• Brent/WTI higher
• Gold rises to a record high of $3127
• UK Lloyds business barometer unchanged at 49 in March
• UK Lloyds own price expectations fall to 61 from 64
• Germany import price index rises to 3.6% y/y from 3.1%
• Germany retail sales accelerate to 0.8% m/m in Feb from 0.7% (revised)
• Germany Bavaria CPI slows a tad to 2.3% y/y in March from 2.4%
• Germany North Rhine Westphalia unchanged at 19% y/y in March
• UK net consumer credit falls to Gbp 1.4bn from Gbp 1.7bn
• UK consumer credit unchanged at 6.4%
• UK Net lending sec. on dwellings fall to Gbp 3.3bn from Gbp 4.2bn
• UK mortgage approvals fall 66.5k from 66k prior (revised)
• UK money supply falls to 3.8% from 4.1%
• UK effective rates mixed. Nominal/real swap rates drop, easing financing conditions
• Italy headline CPI rises to 2% from 1.6% (revised)
• Italy HICP rises to 2.1% y/y from 1.7%
• Italy headline CPI accelerates to 2% y/y, but underlying suggests disinflation intact

DAY AHEAD