EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Track Weekly Gains

• In the FI space, Bund futures are unchanged and the contract continues to trade below last Friday’s high. For now, the latest move down is considered corrective and key short-term support to watch lies at 130.12, the Jun 5 low. A break of this level would highlight a stronger reversal and undermine the bullish theme. Key short-term resistance and the bull trigger, has been defined at 131.95, the Jun 13 high.
• A bullish condition in Gilt futures remains intact and last Friday’s steep sell-off from the session high is - for now - considered corrective. The move higher last week marks an extension of the recent breach of resistance at 91.87, the May 20 high. This signals scope for a test of 93.73, a 1.764 projection of the May 22 - 27 - 29 price swing. Note the uptrend is in overbought territory, a deeper pullback would unwind this position. Initial firm support lies at 92.17, the 20-day EMA.

• MBA composite mortgage applications fell -2.6% (sa) last week for only a modest pullback from a strong 12.5% increase the week prior.
• The lack of reaction to a 9bp decline in the 30Y conforming mortgage rate wasn’t too surprising considering the outsized strength of that prior increase on a 1bp increase previously.
• New purchase applications led the decline (-3.0% after 10.3%) although refis saw a broadly similar pattern (-2.1% after 15.6%).
• Composite applications are at 52.5% of 2019 levels, with new purchases at 64% and refis at 40%.
• The 9bp decline in the 30Y mortgage rate came despite no change in the average 10Y swap rate over the week.
• That saw the mortgage-swap rate narrow to 294bps for its tightest since late March having widened to 315bp in early May (widest since Feb 2024) in fallout from trade policy. It’s still above the 285bp averaged through Q1 before the reciprocal tariff announcements of Apr 2. 

Headlines crossing from Bank of Portugal Governor Centeno:

• " ECB'S CENTENO:VERY WORRIED ABOUT GROWTH IN EUROPE, WITH GROWTH NOT COMING INFLATION WON’T BE AT 2%" - Reuters

Nothing too surprising from one of the Governing Council's most dovish members. On June 6, Centeno noted that "Monetary policy is in a cycle of reducing rates” ...“all data indicates that cycle will continue in 2025. We don’t know at what pace. It’s meeting by meeting, depending on the data.”