EMISSIONS: Czech Calls For Complete Abolition Of EU ETS 2

EUR traded inflation swaps are little changed relative to a month ago. The 5y5y HICP ex-tobacco inflation swap remains close to 2% at 2.09%, while 1-, 2- and 5-year swaps are comfortably below the 2% handle. 

• The trade agreement between the US and China in early May saw market-implied EUR inflation expectations rise, as it implied a reduced risk of disinflationary trade diversion from China into the Euro-area compared to when tariffs were at triple-digit levels.
• However, the combination of soft Eurozone data (May flash PMIs and Q1 negotiated wages) and US President Trump’s latest threats of tariffs as high as 50% on the EU has prompted a renewed softening of traded inflation metrics.
• The May 2025 HICP ex-tobacco inflation swap fixing is currently 189bps. 

Memorial Day operating hours for the major U.S. exchanges and asset classes can be found below.

• CME
• ICE
• NASDAQ
• NYSE
• SIFMA
• Note that U.S. cash Treasury and equity markets are closed today.

The latest CFTC CoT report points to asset managers reducing their curve-wide net long by ~$12mln DV01, with the cohort only extending net longs in WN futures.

• Meanwhile, leveraged funds added to net shorts in TY & WN futures, while they trimmed net shorts across the rest of the curve. They still extended their curve-wide net short position by ~$1.5mln, with the size of the net short build in WN futures (~$4.7mn) dominating.
• Broader non-commercial net positioning saw a mix of net short setting and cover (detailed in the table below). The cohort remain net short across the curve.

Source: MNI - Market News/CFTC/Bloomberg