Fed decision and its QT program in focus

EU Mid-Market Update: Fed decision and its QT program in focus; 'Actions speak louder than words' as Russia & Ukraine hit infrastructure only hours after agreement; Bulls ride Germany's new expansionary fiscal policy.

Notes/observations

- Markets are rattled by escalating Ukraine-Russia tensions. Putin nixed a 30-day full ceasefire, only pausing attacks on Ukrainian energy sites, yet both sides traded infrastructure strikes within hours, dampening risk appetite.

- Eurozone bond yields dipped as Germany’s debt brake tweak sinks in, though warnings linger about smart spending to avoid debt without growth. Sentiments propped up by a bullish shift, BofA’s FMS flags a record US-to-Europe equity rotation, with 39% net overweight on European stocks, the highest since mid-2021

- Turkish lira crashed to a record low (USD/TRY 41.0653) after Istanbul mayor Imamoglu’s arrest on corruption and terror charges, days before an opposition primary. Political chaos deepens Erdogan’s rate-cut push.

- Bank of Japan held steady at 0.5%, as expected (9-0 vote), citing growth above potential via a strengthening income-spending cycle. But new risks, trade policies of “other countries”, nod to global uncertainties, leaving JPY/USD stuck below 150. No forward guidance was given

- Ahead of the Fed’s 14:00 ET decision, US Treasurys barely budged, with yields tipped to ease slightly. Analysts expect a steady hold, Powell likely to double down on no-rush-to-cut messaging amid softer growth bets and tariff uncertainty

- Bank of England’s Thursday decision looms, markets see a hold at 4.50%
- Asia closed mixed with KOSPI outperforming +0.6%. EU indices -0.3% to +0.5%. US futures -0.0% to +0.1%. Gold -0.2%, DXY +0.3%; Commodity: Brent -0.8%, WTI -0.8%; Crypto: BTC +0.9%, ETH +2.2%

Asia

- Bank of Japan (BOJ) left the Target Rate unchanged at 0.50% (as expected) to resume the pause under the current phase of its tightening cycle. Statement noted that the decision to hold policy steady was unanimous (9-0). Reiterated overall assessment that domestic economy recovering moderately, albeit with some weak signs. Growth was seen above potential likely as virtuous income-to-spending cycle gradually intensified. Inflation expectations heightening moderately. Inflation to converge towards level consistent with our price target in latter half of 3-year period projected under quarterly outlook report. Must be vigilant to impact of financial, FX market moves on Japan's economy

- Japan Feb Trade Balance: ¥584.5B v ¥688.3Be; Exports Y/Y: 11.4% v 12.6%e; Imports Y/Y: -0.7% v +0.8%e

- Japan Jan Core Machine Orders M/M: -3.5% v -0.1%e; Y/Y: 4.4% v 6.6%e

- New Zealand Q4 Current Account Balance (NZD): -7.0B v -6.7Be

- Australia Feb Westpac Leading Index M/M: 0.07% v 0.10% prior

Global conflict/tensions

- Pres Trump: noted that his conversation with Russia Pres Putin was very good and productive; many elements of a "contract for peace" were discussed

-White House stated that Trump and Putin agreed to start talks on Black Sea security; Agreed that movement toward peace should start with a ceasefire against energy and infrastructure targets; Would build on that to reach a full ceasefire and permanent peace

- Putin said to have ordered the Russian military to halt attacks on energy plants in Ukraine without delay following 90-minute phone call with Trump

Europe

- German Bundestag (lower house) approved debt brake reform for €500B Defense and Infrastructure fund; received 513 votes for approval (over 2/3 of parliament)

- Times shadow MPC votes to leave interest rates unchanged (vote was 6-3)

- Ireland Central Bank Quarterly Bulletin warned of 'significant' impact from higher tariffs and could not rule out recession; cut GDP growth forecasts amid US tariff threat

- Chancellor (Fin Min) Reeves said to be planning a new, multibillion-pound public spending squeeze in next week’s Spring Statement, following the announcement on Tuesday of £5B in welfare cuts

- Trump Admin said to be considering giving up US' traditional command of NATO military ops in Europe

- Istanbul Mayor Imamoglu said to be detained police (**Note: Imamoglu is seen as Pres Erdogan's main political rival

Energy

- Weekly API Crude Oil Inventories: +4.6M v +4.2M prior

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.13% at 553.56, FTSE -0.30% at 8,679.13, DAX -0.40% at 23,300.39, CAC-40 +0.08% at 8,121.01, IBEX-35 -0.18% at 13,323.43, FTSE MIB +0.34% at 39,669.00, SMI -0.25% at 13,019.50, S&P 500 Futures +0.02%]

Market Focal Points/Key Themes: European indices open generally lower and remained under pressure through the early part of the session; lack of progress in Ukraine ceasefire talks seen weighing on risk appetite; better performing sectors include energy and technology; among sectors leading the way lower ae health care and telecom; Vitol to take stake in some of Eni’s Africa assets; focus on FOMC rate decision later in the day; earnings expected in the upcoming US session include General Mills and WIlliams-Sonoma.

Equities

- Consumer discretionary: Strabag [STR.AT] -12.5% (holder Haselsteiner family said to offer 2M shares) - Consumer staples: Suedzucker [SZU.DE] +0.5% (results).

- Energy: Kazatomprom [KAP.UK] +0.5% (earnings) - Financials: BBVA [BBVA.ES] -1.5% (Turkish markets turmoil), UBS [UBSG.CH] -1.0% (CEO comments) - Healthcare: Haleon [HLN.UK] -0.5% (Pfizer sells 618M Haleon shares at £3.85/shr).

- Industrials: Thyssenkrupp [TKA.DE] -1.5% (German spending bill now goes to other chamber of parliament for approval), Traton [8TRA.DE] -4.5% (VW confirms selling €360M Traton stake at €32.75/shr)

- Real Estate: Vonovia [VNA.DE] -1.5% (results)

Speakers

- EU Foreign Policy Chief Kallas stated that it was clear Russia did not really want to make any kind of concessions; They can't be trusted. Still working on initiative for more EU military aid to Ukraine

- Iceland Central Bank (Sedibank) noted that its decision to cut by 25bps was unanimous. Decline inflation had been broad-based; outlook saw continued disinflation in the coming months. Inflation pressures did remain. Staff Projections raised 2025 GDP growth forecast from 2.3% to 3.6% and raised 2026 GDP growth forecast from 1.5% to 2.3%

- Turkey Fin Min Simsek stated that govt was doing all to ensure markets were functioning

- Turkey Central Bank (CBRT) said to have sold record FX after TRY (lira) weakness

- BOJ Gov Ueda post rate decision press conference reiterated Board view that would raise rates if economic outlook was realized; Reiterated its overall economic assessment that the domestic economy was recovering moderately; Price trend to be in line with goal in second half of horizon outlook. Early April might discern overseas uncertainty more; There was a view at March meeting that there was upward pressure on inflation; Spring wage talk results were somewhat strong. Now was not time when BOJ needed to step into bond market; Could conduct operations if yields suddenly spiked. Risks of falling behind the curve in conducting monetary policy was not that high

- Indonesia Central Bank Policy Statement noted that the decision to keep policy steady was to ensure IDR currency (Rupiah) stability and reflect fundamentals amid the high global uncertainty. To continue assessing room for rate cuts by considering inflation, growth and FX (aka data pendent).

- Indonesia Central Bank (BI) Gov Warjiyo pre-rate decision press conference noted domestic growth maintained despite uncertainty. To optimize policy to maintain stability and support sustainable GDP growth. IDR currency (Rupiah) remained manageable and underpinned by BI policy

- Indonesia Central Bank updated its Staff Projections which maintained 2025 Inflation between 1.5-3.5% range and maintained 2025 GDP growth between 4.7-5.5% range

Currencies/fixed income

- USD consolidated some of its recent losses ahead of the FOMC rate decisions. Greenback trying to move away from recent 5-month lows against the European pairs. Markets believe Fed Chief Powell would likely to reiterate that the Fed was in no rush to cut interest rates further. Focus on the updated economic projections which could raise inflation expectations and lower growth forecasts due to President Trump's tariff policies. Fed futures currently pricing ~43% chance (v ~53% on Monday and ~60% w/w) that Fed does at least three 25bps cuts by end-2025 ahead of FOMC decision and dot-plot update.

- USD/JPY tested the 150 level as the BOJ Gov Ueda began his press conference. The Yen currency firmed up after Ueda noted that there was a view at today's meeting of upward pressure on inflation. Might need to raise rates at a faster pace if upside risks to process heightened.

- The TRY current (*Lira) hit a record low against the USD after reports that Istanbul mayor Ekrem Imamoglu, a key rival of President Erdogan, was arrested.

- 10-year German Bund yield at 2.78% and 10-year Gilt yield at 4.64%. 10-year Treasury yield at 4.29%

Economic data

- (ID) Indonesia Central Bank (BI) left BI-Rate unchanged at 5.75% (as expected)

- (AT) Austria Feb Final CPI M/M: 0.6% v 0.6% prelim; Y/Y: 3.2% v 3.3% prelim

- (ZA) South Africa Feb CPI M/M: 0.9% v 1.2%e; Y/Y: 3.2% v 3.4%e

- (ZA) South Africa Feb CPI Core M/M: 1.1% v 1.3%e; Y/Y: 3.4% v 3.5%e

- (IS) Iceland Central Bank (Sedibank) cut its 7-Day Term Deposit Rate by 25bps to 7.75%

Fixed income issuance

- (IN) India sold total INR330B vs. INR330B indicated in 3-month, 6-month and 12-month bills

- (DK) Denmark sold total DKK2.83B in 2030 and 2035 DGB bonds

Looking ahead

- (IL) Israel Mar 12-month CPI Forecast Y/Y: Noe st v 2.4% prior

- (AR) Argentina UTDT Feb Leading Indicator: No est v 1.1% prior

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)

- 05:50 (EU) ECB allotment in 3-month USD Liquidity Tender

- 06:00 (EU) Euro Zone Feb Final CPI Y/Y: 2.6%e v 2.6% advance; CPI Core Y/Y: 2.4%e v 2.4% advance; CPI M/M: 0.5%e v 0.5% advance

- 06:00 (EU) Euro Zone Q4 Labour Costs Y/Y: No est v 4.6% prior

- 06:00 (CY) Cyprus Feb CPI Harmonized M/M: No est v -1.4% prior; Y/Y: No est v 2.9% prior

- 06:00 (EU) Daily Euribor Fixing

- 06:00 (EU) ECB, BOE and SNB hold weekly 7-day USD Liquidity Tender

- 06:00 (SE) Sweden to sell combined SEK17.5B in 6-month and 9-month Bills

- 6:00 (NO) Norway to sell combined NOK4.0B in 2035 and 2039 Bonds

- 06:00 (GR) Greece Debt Agency (PDMA) cancelled planned GGB Bond issuance

- 06:25 (EU) Daily ECB Liquidity Stats

- 06:30 (DE) Germany to sell combined €2.0B in 2050 and 2053 Bunds

- 6:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 12-month Bills

- 06:45 (FR) ECB’s Villeroy (France)

- 07:00 (US) MBA Mortgage Applications w/e Mar 14th: No est v 11.2% prior

- 07:00 (IE) Ireland Jan Property Prices M/M: No est v 0.5% prior; Y/Y: No est v 8.7% prior

- 07:00 (PT) Portugal Feb PPI M/M: No est v -1.5% prior; Y/Y: No est v -0.3% prior

- 07:00 (ZA) South Africa Jan Retail Sales M/M: +0.3%e v -0.1% prior; Y/Y: 3.9%e v 3.1% prior

- 07:00 (EU) EU Commission to sell combined €4.0B in 3-month, 6-month and 12-month Bills

- 07:00 (CZ) Czech Republic to sell CZK1.0B in variable Aug 2043 bonds; Avg Yield: % v 20.628% prior; bid-to-cover: x v 2.50x prior (Jan 24th 2025)

- 07:00 (RU) Russia to sell OFZ Bonds

- 07:30 (PT) ECB’s Centeno (Portugal)

- 08:00 (ES) ECB’s De Guindos (Spain)

- 09:00 (UK) Daily Baltic Dry Bulk Index

- 09:00 (NL) ECB’s Elderson (Netherlands)

- 10:30 (US) Weekly DOE Oil Inventories

- 11:00 (CO) Colombia Jan Trade Balance: -$1.3Be v -$0.8B prior; Total Imports: $5.4Be v $5.7B prior

- 11:30 (US) Treasury to sell 17-Week Bills

- 12:00 (RU) Russia Q1 Consumer Confidence: No est v -9 prior

- 12:00 (RU) Russia Feb PPI M/M: No est v 0.5% prior; Y/Y: No est v 9.7% prior

- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Target Range unchanged at 4.25-4.50%

- 15:00 (AR) Argentina Q4 GDP Q/Q: 1.3%e v 3.9% prior; Y/Y: 1.7%e v -2.1% prior

- 15:00 (AR) Argentina Feb Trade Balance: No est v $0.1B prior

- 16:00 (US) Jan Net Long-Term TIC Flows: No est v $72.0B prior; Total Net TIC Flows: No est v $87.1B prior

- 17:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to raise Selic Target Rate by 100bps to 14.25%

- 17:45 (NZ) New Zealand Q4 GDP Q/Q: +0.4%e v -1.0% prior; Y/Y: -1.4%e v -1.5% prior

- 20:30 (AU) Australia Feb Employment Change: +30.0Ke v +44.0K prior; Unemployment Rate: 4.1%e v 4.1% prior; Full Time Employment Change: No est v +54.1K prior; Part Time Employment Change: No est v -10.1K prior; Participation Rate: 67.3%e v 67.3% prior

- 21:00 (CN) China PBOC Monthly Loan Prime Rate (LPR) Setting: Expected to leave 1-year and 5-year LPR rates unchanged at 3.10% and 3.60% respectively

- 21:00 (CN) China Feb Swift Global Payments (CNY): No est v 3.8^% prior

**TTN Chart of The Day: