Germany takes global bond curves steeper, but no word yet from BoJ – Focus on ECG rate decision

General trend

- Continued sell off in German bunds with BUXL losing a further -1.0% over and above European trading overnight, following on from 10-year German Bunds yields surging by 32bps to 2.80% in the largest sell-off since after the fall of the Berlin Wall – triggered by expectations of increased spending and borrowing for military and infrastructure by the new coalition govt, providing a potentially much-needed boost for the German economy.

- With the next BOJ outright bond operation scheduled not until March 11th, will BOJ follow through with recent hints at unscheduled bond buying ops due to “excessive volatility”? [Would be first unscheduled JGB buying ops since 2023].

- 14-15 year highs today for all Japan JGB yields, +5-10bps for all tenors from 2-years to 40-years.

- Note that JP 30-yr JGB yield collapsed post auction: Up only 3.6bps (had been up >11bps].

- Asia saw positive equity showings (Hang Seng outperforming +2.9% to fresh 3-year highs), other than Australia’s ASX, under-performing -0.6%.

- Tencent ADRs +6.5%, BABA +8.6% in NY session, JD.com +6.9% as the China National People’s Congress yesterday added official weight to the “AI catch-up” story that DeepSeek and other open source AI promises China; economy in the fiercely contested global battle. [Hang Seng Tech Index +5.0%].

- Still awaiting trade resolution with both Commerce Sec Lutnick and Pres Trump suggesting exemptions such as agricultural and auto carve outs (and potentially others) for Canada and Mexico regarding the so-called ‘fentanyl tariffs’. The US tariff narrative possibly shifting more towards April 2nd and the start of “Reciprocal Tariffs” as the date when actual tariffs may bite for real.

- US equity FUTs flat to -0.1% during Asian trading.

Looking ahead (Asian time zone)

- Thu Mar 6th (Thu night EU rate decision).

- Fri Mar 7th CN Jan-Feb Trade Bal, (Fri night US Feb NFP).

Holidays in Asia this week

- Mon Mar 3rd South Korea.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,146.

- Australia Jan Trade Balance (A$): 5.6B v 5.9Be.

- Australia Jan Building Approvals M/M: 6.3% v 0.0%e.

- New Zealand Q4 Volume of All Buildings Q/Q: -4.4% v -1.4%e.

- New Zealand Feb CoreLogic Home Value M/M: 0.3% v 0.0% prior [overnight update].

- RBNZ acting Gov Hawkesby: We will never get it exactly right on policy.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2028, 2036 and 2041 bonds.

China/Hong Kong

- Hang Seng opens +1.7% at 23,987; Shanghai Composite opens +0.4% at 3,353.

- China could ease property rules in Shanghai and Beijing; cites the research dir at the China Index Academy - China Security Times.

- China said to have released a new product called ‘Manus’ [AI agent]; The performance of Manus said to ‘surpass’ OpenAI model of the same level – US financial press.

- China Pres Xi: Economically developed provinces should actively seek to promote common prosperity for all - Chinese state media.

- China reportedly to expand scale of bond issuance in key sectors - press.

- China Feb Preliminary Retail Passenger Vehicle Sales M/M: -22.0% v -31.9% prior; Y/Y: +26% v -12.1% prior.

- China PBOC sets Yuan reference rate: 7.1692 v 7.1714 prior.

- China PBOC Open Market Operation (OMO): Injects CNY105B in 7-day reverse repos; Net drains CNY111B v prior drains CNY196B.

Japan

- Nikkei 225 opens +0.6% at 37,638.

- Japan Feb Tokyo Avg Office Vacancies: 3.9% v 3.8% prior.

- Japan releases weekly flows data [period ended Feb 28th]: Foreign buying of Japan equities: -¥708.3B v -¥1.04T prior; Japan buying of foreign bonds: +¥1.51T v -¥197.0B prior.

- Japan 2-year JGB yield rises to 0.84%, the highest since Oct 2008.

- Japan 10-year JGB yield +5bps to 1.495%, the highest since Jun 2009.

- Japan 20-year JGB yield rises to 2.195%, the highest since Jun 2009.

- Japan 30-year JGB yield rises to 2.48%, highest since July 2008.

- Japan 40-year JGB yield rises by 10bps to 2.845%, highest since launch in 2007.

- JAPAN SELLS ¥900B VS. ¥900B INDICATED IN 30-YEAR JGB BONDS; AVG YIELD: 2.500% V 2.2900% PRIOR, BID-TO-COVER: 3.50X V 3.74X PRIOR.

- Japan Top FX Diplomat Mimura: We are now seeing an increase in protectionism, such as tariffs - financial press.

- Japan sells ¥3.5T vs. ¥3.5T in 6-Month Bills; Avg Yield: 0.4373% v 0.3716% prior, bid-to-cover: 3.00x v 3.78x prior.

Korea

- Kospi opens +0.6% at 2,573.

- SOUTH KOREA FEB CPI M/M: 0.3% V 0.4%E; Y/Y: 2.0% V 2.1%E (2nd straight month at or above target).

- Bank of Korea (BOK): Inflation faces both upside and downside risk - financial press.

- South Korea Feb Foreign Reserves: $409.2B v $411B prior (update).

- Korea Times: Stronger yen could dampen South Korea ‘travel frenzy’ to Japan [refers to JPY/KRW] - update.

Other Asia

- Vietnam Feb Trade Balance: -$1.6B v $1.3Be.

- Vietnam Feb CPI Y/Y: 2.9% v 3.2%e.

- Vietnam Feb Retail Sales Y/Y: 17.2% v 9.5% prior.

- Vietnam Feb Industrial Production Y/Y: 9.4% v 0.6% prior.

- Taiwan Feb Foreign Reserves: $577.6B v $577.6B prior.

- (IN) India 1-year forward premiums -19bps to 2% post RBI swap measures.

North America

- (US) Pres Trump expected to issue EO to abolish Dept of Education (inline); May come as soon as Thursday - WSJ.

- (US) Pres Trump reported to meet next Monday with US tech CEOs from HP, Qualcomm, Intel and IBM - financial press.

- Mexico oil co Pemex will Not give discounts on its crude to US because of tariffs - financial press, citing sources.

- (CA) Canada govt said to be willing to reduce retaliatory measures if the US drops some additional duties - financial press, citing sources.

- (US) Former Fed Chair Bernanke said recent price 'surge' may impact inflation control - comments at RBNZ conference.

- (US) New York Fed’s top official Perli: Evidence to suggest repo market is normalizing - financial press.

- (US) MBA Mortgage Applications w/e Feb 28th: +20.4% v -1.2% prior.

- (US) US reportedly cuts off intelligence sharing with Ukraine - FT.

- (US) US National Security Advisor Waltz: Ukraine minerals talks moving in right direction; Will lift aid pause if talks are nailed down - TV.

- (BR) Brazil Feb Services PMI: 50.6 v 47.6 prior (moves back into expansion).

- (US) Commerce Sec Lutnick: Ttrump "maybe, maybe" will consider giving relief with announcement on Canada, Mexico to come in the afternoon; Trump thinking what sectors he can consider giving Canada relief, possibly USMCA-compliant categories; my understanding that big-3 automakers are compliant.

- (US) Feb ADP emploment change: +77K V +140KE (lowest since July); Sees signs of "hiring hesitancy among employers".

- (IN) US said to seek zero tariffs on car imports in trade agreement with India; US pushing to zero-to-negligible tariffs on most other sectors except agriculture - press.

- (MX) Mexico's President Sheinbaum: If US tariffs continue, Mexico will reach out to Canada.

- (US) Feb S&P final services PMI: 51.0 V 49.7E (confirms 25th month of expansion).

- (US) Doe Crude: +3.6M V 0ME; GASOLINE: -1.4M V -0.5ME; DISTILLATE: -1.3M V +0.5ME.

- (US) Press Sec Leavitt: Confirms US Pres Trump spoke with Big Three US automakers; Will give one-month exemption to any autos coming across border under USMCA terms; Reconsidering funding for Ukraine, talks on mineral deal are happening.

- *(US) Fed Beige Book: Firms in multiple districts noted difficulty passing input costs on to customers. however, contacts in most districts expected potential tariffs on inputs would lead them to raise prices, with isolated reports of firms raising prices preemptively

Europe

- (UR) 4 senior members of US President Trump entourage said to have held 'secret' talks with 'some' of Kyiv's top political opponents to Zelenskiy - financial press.

- (IE) Ireland Feb Unemployment Rate: 3.9% v 4.0% prior.

- (EU) Said to launch auto plan to aid the industry's competitiveness; To set conditions for investments by companies partnering with European carmakers - press.

- (DE) Germany AFD Party: Considering judicial moves against conservatives and social democrats debt plans.

- (DE) Germany Green party official: It is open to whether we will support debt brake reform [**Reminder: Two-thirds majority needed for changing Germany's constitution, meaning CDU/CSU and SPD coalition would need another party to support the reform].

- (UK) BOE Gov Bailey: Reeves national insurance (NI) contributions increase raises firms' employment costs 2% - letter to Treasury Committee.

- (UK) BOE's Taylor: Consumers are putting off spending; Every meeting of the MPC will be 'live' for rate moves.

- (UK) BOE’s Greene: It's less likely that inflation persistence will fade on its own accord; More likely that monetary policy will need to remain restrictive.

- (UR) Pres Zelenskiy: Expects positive results from cooperation with US next week.

- (FR) French Pres Macron: Need to be ready if US is no longer on our side; To hold meeting of all EU army chiefs next week.

Levels as of 00:20 ET

- Nikkei 225 +1.1%, ASX 200 -0.6%, Hang Seng +2.9%; Shanghai Composite +1.1%; Kospi +0.7%.

- Equity S&P500 Futures flat; Nasdaq100 -0.1%; Dax +0.2%; FTSE100 +0.2%.

- EUR 1.0784-1.0820; JPY 148.73-149.33; AUD 0.6227-0.6357; NZD 0.5720-0.5746.

- Gold flat at $2,924/oz; Crude Oil +0.6% at $66.70/brl; Copper +0.1% at $4.8085/lb.