US STOCKS: At/Near All-Time Highs into Early Equities Close

Tuesday's Europe rates/bonds options flow included:

• ERM5 97.875/98.00/98.125/98.25 call condor, sold out at 11 in 10k
• SFIQ5 95.95/95.90/95.80p ladder, bought for 1.25 in 5k
• SFIU5 95.85/95.75/95.65p fly, bought for 1.25 in 2k
• SFIZ5 96.30/96.50 call spread vs 2NZ5 96.60/96.80 call spread, paper pays 1.75 for 4k

Goolsbee ('25 voter) is now participating in moderated Q&A.

• There are unlikely to be any surprises having already spoken yesterday and Thursday. He said yesterday he's hesitant to make the transitory argument for tariff-driven inflation. Whilst there has been surprisingly little impact on data to date, the April PCE data might have been the last round of pre-tariff data.

Potentially more of note shortly ahead: 1300ET - Cook (voter) on econ outlook (text + Q&A).

• She offered financial stability focused remarks on May 23 (seeing signs of stress in sub-prime borrowers but only moderate vulnerabilities from overall household borrowing). Before that, she said May 10, a few days after the May 6-7 FOMC, that she would want higher rates for longer if productivity is lower whilst warning that protectionist polices may prop up less efficient firms. Against that, there could be a surge in potential output with wider AI use. 

Core EGB / Gilt yields erased much of their early drop late in the session Tuesday.

• An early bid stemmed in part from a strong 10Y JGB auction overnight (recall, weak long-end Japan dynamics had weighed in previous sessions), with Dutch inflation likewise on the weak side bringing down Eurozone-wide HICP, and some pointing to the OECD's global growth forecast cuts / collapse of the Netherlands Government as supportive.
• Global FI softened throughout the rest of the day, with rising equities and oil, and EUR supply weighing.
• After looking to finish with decent gains, Bunds and Gilts sold off in the minutes before the European cash close  with no clear catalyst, some identifying an (apparent) rumour that US Pres Trump was scheduled to call China's Xi on Friday.
• The German curve twist steepened, with the UK's bull flattening. One takeaway from the BOE's TSC hearing was that Deputy Gov Breeden positioned herself as a little more dovish than Gov Bailey.
• Periphery / semi-core EGB spreads closed mixed, with 10Y BTPs at the tightest closing levels to Bunds since April 2021.
• Wednesday brings final Services PMIs. The ECB decision Thursday is the week's main event - MNI's preview is here. Along with the expected 25bp cut, focus will be on any clues around the willingness or lack thereof to highlight a potential pause in July.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.3bps at 1.786%, 5-Yr is down 0.1bps at 2.082%, 10-Yr is up 0.1bps at 2.525%, and 30-Yr is up 0.5bps at 3.017%.
• UK: The 2-Yr yield is down 0.1bps at 4.028%, 5-Yr is down 2bps at 4.143%, 10-Yr is down 2.9bps at 4.638%, and 30-Yr is down 4.3bps at 5.367%.
• Italian BTP spread down 0.6bps at 97bps / French OAT up 0.6bps at 67bps