HUNGARY: Chief Prosecutor Resigns After Months of Political Tension

NOKSEK is up 0.6% to 0.9925, even as Brent crude futures trade below Friday’s settlement levels. The cross was supported around 0.9830 last week, and the initial topside target is the prior breakdown level of 0.9942 (June 11 low). That said, a push back towards parity is likely needed to re-instate a more constructive technical backdrop. 

• Middle East headline flow and broader USD dynamics will be relevant for NOK and SEK in the short-term. However, on a more medium-term basis, last week’s rate decisions underscored the carry advantage Norway has over Sweden.
• The Riksbank’s June minutes on Wednesday headline this week’s Scandi calendar. Last week’s decision was less hawkish than feared, and the case for a rate hike will decline further if the US-Iran MOU proves durable.
• However, if the likes of Jansson and Bunge signal greater openness to the idea of a hike later this year, this would be notable for markets. Note that Thedeen and Seim already sit on the hawkish side of the Board. 

Figure 1: NOKSEK Since 2025

SOFR & Treasury options trade outlined below: modest volumes are gradually picking up as US desks come back online. Underlying futures weaker but off lows: TYU6 is currently -9.5 at 109-10.5 vs. 109-07 low, 10Y yield at 4.4869% (+.0337). Initial technical support at 108-25 (June 8 low) followed by 108-08.5 (May 19 low and bear trigger). Curves flatter - holding near last week's 14 month lows after the Fed's hawkish shift (2s10s -.464 at 26.561; 5s30 s-1.277 at 65.065). Projected rate hike pricing - little off overnight highs - look steady to mildly hawkish vs. late Thursday lvls (*): Jul'26 at +9.1bp (+9.1bp), Sep'26 at +23.7bp (+23.3bp), Oct'26 at +31.1bp (+30.9bp), Dec'26 +41.8bp (+38.9bp).

• SOFR Options:
  • 6,100 SFRN6 96.00 puts ref 96.045
  • 14,000 SFRQ6 95.81 puts, 2.75 ref 96.045
  • Block, -20,000 SFRV6 96.18 calls, 5.0
  • -2,000 SFRZ6 96.12/96.25 put spds, 8.5
  • 4,000 SFRU6 95.75/96.00/96.37/96.62 call condor, 17.5 vs 96.045/0.20%
  • +4,000 0QZ6 96.50/97.00 call spds, 6.5
  • Block, 5,000 SFRU6 95.75/96.00 put spds 2.5 over 0QU6 95.37/95.62 put spds covered
  • -2,000 SFRZ6 95.37/95.62 put spds, 5.25
  • +2,000 SFRH7 95.75/95.93 put spds, 9.25
  • +3,000 SFRQ6 95.87/96.00 put spds vs 96.18/96.375 call spds, 1.5
  • Block, +2,750 SFRH7 96.18/96.31/96.43 put flys, 1.25
  • +5,000 SFRZ6 96.00/96.12/96.25 call flys, 1.0
• Treasury Options:
  • 1,000 FVU6 108 calls 9.5 ref 106-21
  • over -11,000 TYN6 109 puts, 4.0 
  • 13,300 TYN6 111 calls ref 109-11.5
  • -2,500 Wed wkly TY 108.75/109.25 put spds, 6
  • -1,000 TYU6 109/110 strangle, 115 vs 109-11/0.10%

30-Year swap spreads have rallied ~2bp from intraday lows, with the resignation of PM Starmer and former Health Secretary Streeting’s support for Andy Burnham’s bid to became Labour leader removing the risks of drawn-out unrest/political roadblocks if Starmer decided to cling on to power.

• Spreads have also gained support from reduced odds of a longer-run Labour leadership contest and the potential that Streeting will become Chancellor after he supported Burnham (he is viewed as a more market-friendly candidate than say Miliband).
• Still, the spread sticks within the multi week closing range (-70.8bp to -67.1bp since mid-May).
• We previously noted that downside risks to long end swap spreads stem from more expansionary fiscal policy, the supply backdrop and the future of BoE asset sales. These risks remain evident.
• Zooming out, one or more of the following inputs is likely required to promote a break of late February highs in long end spreads:
• Lower energy prices,
• Burnham adopting a more conciliatory fiscal stance if he does become PM.
• A reduction in BoE APF sales (more relevant for the 10-Year spread with no further long bucket sales scheduled at present). The BoE will decide on its APF sales covering the October ’26-September ’27 period at the September ’26 MPC.
• Ongoing skew shorter in the WAM of the DMO’s issuance profile (possibly by combining the medium/long syndication baskets or continuing to cancel long auctions).