PIPELINE: $2.8B PNC 3Pt Launched Recently

• US rates have seen their twist flattening accelerate (SFRZ5/Z6 -4.5 ticks) as oil futures continue to push higher (WTI +3%) on geopolitical tensions.
• Fed Funds implied rates are 1.5bp higher for the Dec’25 meeting for session highs and within 3.5bp of pre-CPI levels that had been their most hawkish since February.
• Cumulative cuts from 4.33% effective: 0bp for tomorrow, 3bp Jul, 17.5bp Sep, 29.5bp Oct and 45.5bp Dec.
• The SOFR implied terminal yield of 3.29% (SFRZ6, -3bp) last closed lower on Jun 12 and Jun 4.
• Trump is set to decide today on joining the Iran conflict having earlier called for unconditional surrender and Iran calling on Israelis to evacuate Haifa and Tel Aviv.
• Axios' Ravid has noted that: “The U.S. officials said Trump is seriously considering joining the war and launching a U.S. strike against Iran's nuclear facilities, especially its underground uranium enrichment facility in Fordow.”

RRP usage bounces to $168.939B this afternoon from $140.759B yesterday, total number of counterparties at 37. Usage had fallen to $54.772B on Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B.

European yields rose modestly Tuesday, with curves mostly flattening.

• Yields gapped higher on the open, catching up with the weakness in global bonds after Monday's cash close. Geopolitical and related inflation (energy)-related risk weighed on sentiment throughout amid the ongoing Israel-Iran conflict.
• Yields moved lower and hit session lows in a safe haven bid as the Israeli Defence Minister pointed to further attacks on Iran, a move that extended after weaker-than-expected US retail sales data.
• Core EGBs and Gilts would pull back again over the afternoon, with oil and gas prices moving higher, and some consideration given to robust US core retail data and firm import prices.
• German ZEW expectations jumped in June, with current conditions also improving.
• The German curve twist flattened, with the 2Y-5Y segment underperforming the UK which saw bear steepening and longer-end underperformance ahead of Wednesday's UK CPI data.
• Periphery / semi-core EGB spreads widened steadily through a broadly risk-off session.
• MNI's Markets Team sees downside risks to the headline UK CPI and services readings Wednesday  - our preview is here.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.7bps at 1.868%, 5-Yr is up 2.1bps at 2.141%, 10-Yr is up 0.8bps at 2.535%, and 30-Yr is down 0.1bps at 2.985%.
• UK: The 2-Yr yield is up 1.7bps at 3.923%, 5-Yr is up 1.3bps at 4.053%, 10-Yr is up 1.7bps at 4.55%, and 30-Yr is up 2.9bps at 5.283%.
• Italian BTP spread up 2.4bps at 95.2bps / Spanish up 1.3bps at 63bps