CZECHIA: CBA To Release Quarterly Forecast, Cabinet Meets After Summer Break

Societe Generale recommended ERH6/H7 flatteners boxed vs. SOFR late last week.

• They noted that “given the uncertainty surrounding tariffs, it is still too early to factor their impact into the ECB’s reaction function. However, being one of the largest net exporters in the world, the EU will most likely see higher deflationary risk than the U.S. will”.
• They go on to flag that “in the ECB’s June macroeconomic projections, a severe scenario with around a 15% tariff on EU exports and 8% counter-tariffs on U.S. exports was expected to increase U.S. inflation mostly in 2026 and decrease euro area inflation mostly in 2027. This doesn’t fit into the market pricing where the Fed continues to cut in 2026 while the ECB starts hiking”.

Gilts look to the previously outlined rally in core global FI markets in early Monday trade.

• Futures rally to 91.51, initially respecting Thursday’s high (91.53), before easing back to 91.40.
• Fresh extension higher would eye the 20-day EMA (91.99).
• Still, bears remain in technical control at this stage, next support seen at Friday’s low (91.08).
• Yields 1.5-3.5bp lower, curve flattens, akin to moves in global peers.
• 2s10s and 5s30s remain tethered to ~75bp and ~140bp, respectively, consolidating a little below their ’25 highs.
• 10s ~1bp wider vs. Bunds, spread back towards 200bp.
• GBP STIRS still around levels that we outlined in our pre-gilt open comments, showing 48bp of BoE rate cuts through year-end.
• Little of note on the UK calendar today.
• Flash PMIs, public finances and retail sales data are due this week, while BoE Governor Bailey will testify on financial stability matters.

TYU5 110/112 strangle bought paper paid 0-45 on ~18.6K.