STIR: 2025 Rate Cut Prospects Build But Only Back To Pre-CPI Levels

Israel's Kan reports that, "several Arab countries, including Qatar, Saudi Arabia, and the United Arab Emirates, are trying to convince Iran to return to the negotiating table [with the US] due to the assessment that Israel is planning another round of fighting." An Arab diplomat said: "We are asking the Americans to be patient and the International Atomic Energy Agency not to act hastily with Iran."

• The report notes: "An Arab diplomat [said] many countries in the region are currently investing great efforts to reach a political solution and convince the Islamic Republic to return to the negotiating table... According to the diplomat, the countries focusing on this effort are Egypt, Qatar, Saudi Arabia, the United Arab Emirates, and Oman."
• The report comes after an Iranian Foreign Ministry spokesperson this morning appeared to nix the prospect of new nuclear talks with the US in the near term. See: IRAN: Foreign Ministry-No Plans For Talks w/US Ahead Of E3 & Rus/China Meetings
• Raz Zimmet at the Alliance Center for Iranian Studies notes: "The concern of Gulf states about the renewal of fighting between Iran and Israel is understandable. However, it is doubtful whether Tehran is interested at this stage in returning to a negotiated framework, especially one that would require concessions perceived by it as capitulation to U.S. dictates..."
• Axios reported yesterday that the White House is "significantly more alarmed about [Israeli Prime Minister Benjamin] Netanyahu and his regional policies," after airstrikes on Syria last week. 

"*UK'S DEBT MANAGEMENT OFFICE TO CANCEL TWO GILTS DUE TO DONATION" - bbg

Full DMO release on that is here, it's the 4⅛% Treasury Gilt 2027 and 0⅜% Index-linked Treasury Gilt 2062 that are to be cancelled, with a £14mln and £7.8mln nominal holding per line. The cancellation is as a result of "a donation to the Donations and Bequests Account made during the financial year ending 31 March 2025": https://www.dmo.gov.uk/media/hicb4is2/sa210725.pdf

June's Conference Board US Leading Economic Index (LEI) fell by 0.3% M/M as expected in June, pulling back from 0.0% prior (upward rev from -0.1%). 

• This index has been negative the vast majority of the time for the last few years despite solid economic growth measured by GDP, so we take its signal of outright economic dynamics with some skepticism. Indeed we take the LEI mainly as a signal of manufacturing momentum as it is extremely heavily weighted toward cyclicality in manufacturing, and in this regard the pullback the last few months suggests only a limited industrial recovery over the rest of the year.
• The composition of the latest negative reading is broadly weak however: our own categorization of the LEI components point to only one positive segment: financial conditions (+0.2pp contribution) which exactly offset weaker manufacturing (-0.2pp, on ISM New Orders and Core Capital Goods orders). In turn the financial conditions reading is almost entirely stock driven by stock prices, though rate spreads and the leading credit index were both positive as well.
• From a broader economic perspective, we take note of the pullback in consumer activity in the LEI (composed of Consumer Goods Manuf New Orders, Avg Consumer Exp) which while recovering from April's extreme confidence-driven lows remains soft in part due to a tepid recovery in new orders for consumer goods.