LOOK AHEAD: Delayed Weekly ADP, Late Fedspeak and 5Y Supply

"EFSF, the European Financial Stability Facility rated Aaa (Moody’s) / A+ (Fitch) / A+ (S&P), has mandated Citi, Credit Agricole CIB and LBBW to joint lead manage its upcoming 7yr EUR Benchmark maturing 6th September 2033. Format: RegS Bearer. No further selling group. The transaction is expected to be launched and priced in the near future, subject to market conditions. ISIN EU000A2SCAZ3."

Bloomberg Bonds:

• US Tsys: +0.06yr (average).
• EU Govies: +0.07yr (average).
• UK Govies: 0.00yr (non event).

MS BONDS:

• US Tsys: +0.04yr (small).
• EU Govies: +0.07yr (average).
• UK Govies: -0.02yr (non event).

Barclays FX:

• Their Rebalancing Model sees strong Dollar selling against all the majors.

UBS FX:

• Their rebalancing Model sees USD selling for Month End. Their signal is strongest against the NZD, closely followed vs EUR and also the Pound.
• They add that the Nikkei's outperformance versus the SPX in April, would suggest lesser pressure in the USDJPY compared to other Pairs.

• As the BOJ seeks to maintain optionality at Tuesday's rate decision, there is a risk that the guidance on whether it would be willing to raise rates in June could be less explicit given the lack of clear evidence of a material impact on economic activity or inflation from the surge in energy prices.
• Markets expect an unchanged decision to be accompanied by signalling that tightening remains on the table. However, June OIS swaps, which assign a near 65% risk of a hike, may be vulnerable to slippage if guidance on rate hike timing is more non-committal.
• Consequently, long June JPY OIS may be a relatively cheap hedge into the BOJ meeting as an expression to mitigate the risk of a "dovish" disappointment if June pricing softens.
• Amid elevated uncertainty stemming from the US/Iran conflict, Ueda is expected to reiterate the bank’s stance of gradually raising the policy rate, citing low real rates and the need to ease yen-selling pressure, leaving the possibility of a June hike open.
• A June hike is clearly possible if inflation surprises on the upside, but prolonged geopolitical stress could delay tightening further amid significant downside risks to growth. Indeed, pushback from the Takaichi government, which has signalled that tightening amid energy shocks could hurt the economy, could reinforce short-term caution.

• Note July pricing is ~90% and the BOJ could arguably have more clarity on the impact of higher energy prices given the availability of both June’s Tankan and the full SME wage outcomes by then.