EU CONSUMER STAPLES: Elo/Auchan; up to +16bps/-0.3pts

Looks like block flow helps drive this latest leg of Bund strength with ~2.5K lots lifted at 130.15.

• Contract nears resistance at the 50-day EMA (130.21).
• Flow helps underpin wider core global FI as NY participants start to filter in, new session highs registered across the major contracts.
• Little new on the headline front, focus remains on hawkish U.S.-EU trade reports released over the weekend.

• Fed Funds implied rates are up to 1bp lower overnight for 2025 meetings, seemingly stemming from a WSJ report reiterating stances seen last week that the EU is preparing to pushback more firmly against US trade measures.
• Cumulative cuts from 4.33% effective:  1bp Jul, 17bp Sep, 30bp Oct, 46.5bp Dec, 57.5bp Jan and 72.5bp Mar.
• The near-term path remains within last week’s range though, primarily driven by some hawkish CPI details before Trump-Powell headlines notably built on a dovish PPI report.
• Rates see larger rallies further out the curve as weaker growth prospects weigh.
• That’s demonstrated by the SOFR implied terminal yield dropping 4bps from Friday’s close for 3.145%, tilting a little closer to five rather than four cuts for the cycle from current levels.
• The FOMC has entered its media blackout ahead of the Jul 29-30 meeting. 

The latest CFTC CoT report pointed to cover of existing positions across the major investor cohorts (in curve-wide terms) that we track during the week ending July 15.

• Asset managers trimmed net longs in all contracts outside of TU futures (where they extended their net long), reducing their net long exposure by a little over $13mln DV01, albeit remaining net long across the curve.
• Leveraged funds also trimmed net shorts in most contracts (only extending net shorts in TU & US futures), reducing exposure by ~$4.5mln DV01, but remaining net short across the curve.
• Broader non-commercial net positioning saw net shorts added to in the wings (TU, US & WN), while net shorts were trimmed in the belly & intermediates (FV, TY & UXY), with the cohort remaining net short across the curve.

Source: MNI - Market News/CFTC/Bloomberg Finance L.P.