STIR: EUR Front End Move Spills Over Into GBP, 37bp Of BoE Cuts Priced

Core global FI markets firm through early London trade, although market liquidity remains thin given the time of year.

• Spillover from Friday’s move lower in crude oil is probably lending some support to EGBs as they play catch up to the uptick in Tsys, while e-minis edge lower, providing further cross-market support.
• No meaningful spillover from the summary of opinions covering the latest BoJ meeting, which pointed towards the likelihood of further tightening.
• Bunds trade as high as 127.77, breaching first resistance at 127.52. Bulls now look to the nearby 20-day EMA (127.87). A break there would pose a deeper threat to the bearish technical theme.
• First support located at 126.75.
• German yields 0.5-2.5bp lower, curve bull flattens.
• EGB spreads vs. Bunds are printing mixed and it’s hard to gauge true levels in current liquidity conditions.
• U.S. President Trump’s positive rhetoric surrounding the Russia-Ukraine conflict was noted over the weekend, despite familiar sticking points remaining in place. Ukrainian counterpart Zelensky described weekend talks as "90%" of the way to a deal.
• Little of note on the G20 calendar today.

A screen sale of TYH6 helps cap the aforementioned bid, 1.9K given at 112-23.

Zelensky arrived at Mar-a-Lago yesterday evening for the latest meeting with President Trump, at which progress appears to be being made on proposals to end the war with Russia.

• Ahead of the meeting, Trump stated there are the "makings of a deal" - comments that seem to stem from Zelensky leaving open the possibility that Ukraine could surrender territory in the Donbas in return for a ceasefire along current lines. The caveat being the proposals would be subject to a referendum among the Ukrainian population.
• Expectedly, Putin has already rejected these terms for a ceasefire, which they see as only temporary and resulting in a "prolongation" of the war, but Russia and the US remain engaged. Zelensky described the talks as "90%" of the way to a deal.
• On the frontlines, this adds pressure to both sides to retain, or grow, their currently held territory - with Trump suggesting yesterday that Russia would soon capture all the remaining Donbas - adding pressure to Ukraine to accept a proposed deal.