POWER: EU End of Day Power Summary: Germany, France Rebound from Mid-Day

Reuters reports that, according to the office of President Marcelo Rebelo de Sousa, the president has accepted the cabinet lineup presented to him by PM Luis Montenegro. Expresso reports that "As the Prime Minister himself has said, it is expected that a large part of the outgoing government will be reappointed, but with "renewed energy". [...] Paulo Rangel and Miranda Sarmento will continue in the Foreign Affairs and Finance portfolios, Miguel Pinto Luz will keep the Infrastructure portfolio, Ana Paula Martins should continue in Health, although at least one Secretary of State will change. Fernando Alexandre will also be reappointed in Education."

• Following the 18 May legislative election, Montenegro plans to lead a minority gov't formed by his centre-right Social Democratic Party (PSD) supported by the conservative People’s Party (CDS-PP). The gov't holds 91 seats in the 230-member Assembly of the Republic. While this is more than the 80 seats won in the 2024 election, it still leaves the gov't vulnerable to defeats on budget bills and confidence motions.
• PM Montenegro has been vague on who he will seek to work with to pass legislation. For the past year, efforts focused on the centre-left Socialist Party (PS), but these eventually failed amid disagreements over the budget and the Spinumviva case.
• The right-wing nationalist Chega now sits as the main opposition with 60 seats to the PS' 58. To date, no party has worked with Chega, maintaining a cordon sanitaire or 'firewall' around the party. 

Late morning SOFR options still leaning towards downside put spds even as underlying futures see-saw around post-ISM data highs. Projected rate cut pricing continues to gain vs. morning levels (*) as follows: Jun'25 at -1.1bp (-0.7bp), Jul'25 at -7.8bp (-7.4bp), Sep'25 at -23.9bp (-22.7bp), Oct'25 at -37.8bp (-35.9bp), Dec'25 at -55.2bp (-52.4bp). Latest trade includes: 

• +4,000 SFRZ5 95.62/95.68/95.81 put trees, 1.0
• +4,000 0QM5 96.62/96.87 call spds .75 over 3QM5 96.50/96.75 call spds
• +15,000 0QZ5 95.00 puts, 1.5 ref 96.77
• +3,000 SFRH8 97.50/98.50 call spds w/ 98.00/99.00 call spd strip, 33.5
• +5,000 SFRZ5 95.56/95.68/95.81 put fly w/ 96.00/96.12/96.25 call fly strip 3.5
• -4,000 SFRU5 95.75/95.81/96.00 put flys 2.5 over 95.68/95.81 put spds

• US TSY 17W AUCTION: NON-COMP BIDS $606 MLN FROM $60.000 BLN TOTAL