EURIBOR OPTIONS: Call spread seller

ECB-dated OIS continue to price just over one full 25bp cut through year-end, with only 3bps of easing priced through the July decision. Following the more hawkish-than-expected stance at President Lagarde’s press conference last Thursday, the bar to another sequential 25bp cut appears high. However, it’s worth remembering that a lot can change between now and July 24, particularly with tariff reprieve deadlines set to expire in this period. 

• The MNI Policy Team’s sources piece last Friday noted that tariffs are pivotal for determining [the ECB’s] next moves in 2025, though one more 25-basis-point cut in either September or December is the base-case scenario.
• Euribor futures are flat to +3.0 ticks through the blues, with a flattening bias seen at the front-end. Volumes may be limited by today’s Whit Monday public holiday in some Eurozone states, alongside and the thin data calendar.
• Weekend ECBspeak saw Nagel and Vujcic note that rates were now in neutral territory (a question Lagarde avoided answering at last Thursday’s press conference). Meanwhile, Escriva remains “very comfortable with gradualism, that is, accompanying improvements in inflation with successive 25-basis-point rate cuts”.
• This week's Eurozone calendar is fairly limited, with most interest probably in Wednesday's ECB wage tracker release. The April vintage saw negotiated wages excluding one-off payments falling to 3.024% by Q4 2024. 

Gilts rally a little, with core global FI off late Friday/Asia lows and oil off Asia highs.

• Futures comfortably in Friday’s range, topping out at 92.00.
• Yields 1-2bp lower, belly outperforms.
• 2s10s ~62bp, recent breaks below 60bp haven’t been sustained.
• 5s30s ~119bp, after forcing the first sub-120bp closes since early April last week.
• GBP STIRs still trade around levels flagged pre-gilt open, showing ~40bp of cuts through December.
• UK labour market data is due tomorrow, expect our full preview of that release later today. A reminder that the BoE has placed more weight on labour market inferences from surveys, given the long running issues with the ONS readings.
• Elsewhere, Chancellor Reeves will outline the government’s spending review on Wednesday.
• Unlike a Budget or Spring Statement, the review will not contain new forecasts from the OBR, nor will it announce new tax and spending measures.
• Instead, Reeves will detail the spending allocations for individual government departments over the next several years.
• The review is fraught with political risks for Reeves and PM Starmer, with ministers jockeying for the most beneficial outcome for their department.
• The Chancellor has already warned that due to the limited fiscal headroom, not every department will “get everything they want”, risking divisions in Cabinet and ire on the backbenches if Labour MPs do not see sufficient funds going towards areas of concern for them.

More rolling Positions requirements will be in Focus this Week, CME FX will be first with Expiry next Monday, and expect Equities to start towards the end of the Week, triple Witching is on the 20th June:

FX ROLL PACE:

• EUR: 12%.
• GBP: 18% (above pace).
• JPY: 35% (above pace).
• CHF: 19% (above pace).
• CAD: 14%.
• AUD: 10% (below pace).
• NZD: 8% (below pace).