EUROZONE ISSUANCE: EGB Supply

Bears failed to test the next round of targets (124.88, the June 10/11 low in futures and 3.10% in yields). Energy price swings remain the dominant factor on the day, with increased uncertainty surrounding the situation in Iran and prospects for a fresh round of U.S. strikes on Iran/subsequent Iranian retaliation evident. 2s10s back below 40bp as a result.

Kentucky Governor Andy Beshear (D-KY) has formally requested that Senator Mitch McConnell (R-KY) provide an update on his health, citing weeks of limited information since McConnell’s June 14 hospitalisation. The letter comes after a 911 dispatch audio noted that a person was found “unconscious” and had suffered “cardiac arrest", fuelling speculation on Capitol Hill that the former GOP leader may not return to Congress, and that his office may be downplaying the severity of his condition, per The Hill.

• Senate Majority Leader John Thune (R-SD) and Majority Whip John Barasso (R-WY) both indicated via spokespeople on Tuesday that they talking with McConnell on Monday, without expanding on his condition. WAPO reports, “Right-wing influencers aligned with President Donald Trump have spread unverified claims that the senator is gravely incapacitated and have accused GOP leaders of a cover-up.”
• A prolonged medical absence could have major implications for legislation in the Senate as proxy voting is not permitted and there is no mechanism for removing incapacitated senators.
• McConnell holds a key seat on the Senate Appropriations Committee, which is split evenly between Republicans and Democrats in McConnell's absence. A gridlocked committee would be unable to advance spending bills to the floor, raising the risk of a government shutdown, derailing prospects of a third reconciliation bill, and leaving key legislation like an Iran war supplemental in limbo.
• If McConnell is indeed incapacitated, a special election would be held to fill the seat before the general election in November. However, if McConnell’s health deteriorates after the filing date for a special election, the seat could remain empty until January 2027.   

• RES 4: 111-03   50.0% retracement of the Mar 2 - May 19 bear leg
• RES 3: 110-28+ High May 7, 2026
• RES 2: 110-14   38.2% retracement of the Mar 2 - May 19 bear leg
• RES 1: 109-25+/110-10+ High Jul 2 & 6 / High Jun 26 
• PRICE:‌‌ 108-27 @ 15:33 BST Jul 08
• SUP 1: 108-25   Low Jun 08
• SUP 2: 108-08+ Low May 19 and the bear trigger
• SUP 3: 108-04   1.500 proj of Apr 17 - May 4 - 7 swing
• SUP 4: 107-29   1.618 proj of Apr 17 - May 4 - 7 swing

Treasuries continue to depreciate. This week’s move lower reinforces a bear threat. The move down has resulted in a breach of 109-06, the Jun 22 low, signalling scope for an extension towards 108-25, the Jun 8 low. Key support and the bear trigger is 108-08+, the May 19 low. Initial firm resistance to watch is 109-25+, the Jul 2 and 6 high. A break of this hurdle would be bullish and expose 110-10+, the Jun 26 high and bull trigger.