US TSY OPTIONS: BLOCK: Short Term 2Y Put Fly

• +10,902 FVZ6 103-11, buy through 103-10.75 post time offer at 1136:38ET, DV01 $456,000
• The 5Y contract trades 103-10.5 last (-3.5)
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• The EUR, CAD and NZD all hit new cycle lows against the USD on Monday, with the most recent phase of USD upside triggered by EURUSD breaking below and showing through key support at the base of the bear channel drawn off the April high. We flagged the importance of this level last week (crossing Monday at 1.1257) and see this break of support as particularly important for the medium-term trend, especially when allied with the show below 1.1187, the 100% projection of the April-June downleg drawn off the late August high. Natural support undercuts here at 1.1111, the 50% retracement of the 2025 - 2026 range, but don't expect substantial support until the 1.0955 - 1.1065 zone: 

Source: MNI / Bloomberg

• Markets stabilised through the US session, however, as PMI data in Europe showed Spanish and Italian economic activity improving, and as the employment component of ISM services came in ahead of expectations. That said, political risk continues to build and remains the market focus as early elections were called in Spain and as Axios reported that Trump's top national security team had met at Camp David in secret to disucss the Iran war and the conflict in Yemen.
• Reports that Yemeni government and Saudi-backed forces had retaken control over the Bab El-Mandeb Strait further stabilised markets, helping equities improve from the US cash open. The e-mini S&P narrowed the gap with the late September high of 7848.50 through the London close, but the improvement in sentiment was not enough to prevent NZD slippage.
• Focus Tuesday turns to French Industrial & Manufacturing Production, Eurozone retail sales, US & Canadian trade balance data as well as speeches from ECB's Zigman, Cippollone (at an MNI event), Fed's Williams, Schmid & Bowman. 

US Vice President JD Vance has claimed that the US decided to pull its bombers from RAF Fairford air base in the UK "out of an abundance of caution" following what some US outlets have reported as a 'new threat' at the base after a 'major incident' in late September, when three 'suspicious vehicles' were spotted near the base, resulting in arrests. 

• Speaking at Joint Base Andrews, Vance said, "What you saw there is the Secretary of War, out of an abundance of caution, trying to protect our guys. We do feel with some confidence that the Iranians are trying to do what the Iranian state has done for 49 years, which is engage in acts of terrorism against the United States and against a lot of other people as well."
• Secretary of State Marco Rubio had sought to downplay the withdrawal earlier, saying "It's not unusual to see movement of assets to different parts of the world..."
• In the UK, the withdrawal of the US bombers has been seen as an indication that the Pentagon does not have faith in Britain's ability to ensure security at the base.
• While developments such as these are not 'market moving', the withdrawal of the B-1 bombers will, as the BBC notes "see the US lose a foothold for the country outside continental Europe." Given the still-tense situation in the Middle East, any disruption to US military logistics or offensive capabilities is a notable shift.