EUROPEAN INFLATION: Easter Sensitive Categories Drove May Services Disinflation

E-minis tick lower (but remain above worst levels of the day) as China issues a statement noting that the recent U.S. guidance warning against the use of Huawei’s Ascend chips.

• China notes that the guidance undermines the consensus that was reached between the U.S. & China at the recent Geneva talks, urging the U.S. to correct its “wrongdoings”.
• This isn’t the first time we’ve seen such rhetoric from China on the matter, with similar comments surrounding the U.S. “abusing export controls” made on Thursday of last week.
• That helps explain the limited nature of the move lower in e-minis, but this does serve as a reminder that some of the recent moderation in Sino-U.S. trade tensions could be quickly reversed if one side doesn’t like the actions of the other.
• A reminder that the step down in tariffs between the two is only in play for 90 days, although the closely watched nationalist Global Times media outlet in China has suggested that the truce should be extended.

Secured rates softened slightly Friday, with SOFR dipping 1bp to 4.30%, partially reversing Thursday's 2bp uptick (related to mid-month Treasury auction settlements) to 4.31%. 

• The pullback came on the usual monthly cash flows from Government Sponsored Enterprises (GSEs). These are set to reverse toward the end of this week on GSE outflows going into the Memorial Day Weekend and thus putting some renewed upside pressure on SOFR.
• Fed funds printed 4.33% as usual.

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.30%, -0.01%, $2617B
* Broad General Collateral Rate (BGCR): 4.29%, -0.01%, $1062B
* Tri-Party General Collateral Rate (TGCR): 4.29%, -0.01%, $1024B

New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume:  $117B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume:  $302B