EM LATAM CREDIT: El Salvador: U.S. Senators Want Sanctions - Neutral

Delivering his first speech to the Bundestag as chancellor, Friedrich Merz commits to his gov't providing “all necessary financial resources” to see Germany's military become the most powerful in Europe in conventional terms (i.e. as a non-nuclear power). Merz said that "Strength deters aggression; weakness invites aggression," as his gov't prepares to take advantage of reforms to the debt brake enacted prior to the new coalition coming to power. The gov't will now have the ability to raise defence spending as any increase above the level of 1% of GDP is now exempted from the brake. 

• While the gov't has committed to significant defence spending increases, the immediate pressure on German (and wider European) defence spending could come sooner rather than later depending on the US' position on continuing to fund the Ukrainian military and provide financial aid to Kyiv. Germany's new Foreign Minister Johann Wadephul said a short time ago that "We won't fully be able to fill the gap if the US withdraws from peacekeeping funding." Meanwhile, Ukrainian Finance Minister Sergii Marchenko has said that he sees "some kind of gap in support next year". 

Very short term FX Weekly Exchange traded Option, suggest a new position, there are no Open Interest in those Strikes.

• EURUSD (16th Mat) 1.1350/1.1400cs, bought for 0.00010 in 2.3k.

Bund block trade, suggest seller

• RXM5 3.23k at 129.51.

Worth keeping an eye on the US Tnotes (TYM5), while Yesterday's low is at 109.30, the 4.50% Yield is circa 109.28+, now at 4.496%.

The Yen is unaffected still, but further breakout lower in TYM5 might provide some demand in USDJPY.