OIL: China Crude Imports from Malaysia in May Fell 36.2% on the Month

• The BTP/Bund spread, while showing a small touch wider, it continues to make an attempt through that Psychological 100.00bps level.
• As noted a Week ago, immediate downside target is at ~97.7bps (September 2021 low).
• And a further Tightening interest through would Open to 90.4bps (February 2021 low).

Citi identify several risks to existing steepener positioning on the EUR swaps curve (with a particular focus on 30s50s):

• “While originally around half of the total €1600bn assets (at end-2024) were targeted to transition each on 1 January 2026 and 1 January 2027, the DNB’s Q4 survey showed a shift later. Recently PME has shifted its transition from 1 January 2026 to 1 January 2027 and PostNL to April 2026, due to administrative difficulties. This could delay/stagger these unwinds”.
• “Any delay in transition could also be an incentive for funds with policy funding ratio under 120%. They could wait for a recovery in funding ratios from fiscal pressure on global long-end swaps to then add interest rate hedges at cheap levels”.
• Overall, they “suspect that any further 30s50s steepening due to this transition might only happen later in the year when more clarity emerges, for instance, from the next DNB survey, potentially published in July”.
• However, they stress that “the asymmetric long-end exposure to front-end swings has become more compelling over the last six months - which we believe supports 30s50s steepeners from a broader macro standpoint”.

2-Year yields move above the April 10 high (4.078%) following the CPI data, peaking at 4.088%.

• The next upside level of note comes in at the downtrend line drawn off the January high (4.119% today).
• April 9/10 highs are unchallenged across the rest of the curve.