EURIBOR: EUR Rates are heloing Govies higher

Note that swap spreads hold tighter on the day, last 0.8-2.2bp lower, with the long end under the most pressure. Moody’s downgrade of the U.S. after hours on Friday is having a mechanical impact here, cheapening bonds to swaps.

• The Conference Board’s Leading Economic Index (LEI) fell -1.0% M/M as expected in April after a downward revised -0.8% (initial -0.7) in March.
• The press release notes this is the “largest monthly decline since March 2023, when many feared the US was headed into recession, which did not ultimately materialize”.
• “Most components of the index deteriorated. Notably, consumers’ expectations have become continuously more pessimistic each month since January 2025, while the contribution of building permits and average working hours in manufacturing turned negative in April.”
• “Widespread weaknesses were also present when looking at six-month trends among the LEI’s components, resulting in a warning signal for growth. However, while the six-month growth rate of the LEI went deeper into negative territory, it did not fall enough to trigger the recession signal.”
• The Conference Board currently forecasts US real GDP growth of 1.6% in 2025 after 2.8% in 2024, “with the bulk of the impact of tariffs likely to hit the economy in Q3.”

The sell USD assets theme comes to a halt over the last hour or so, with e-minis, the broader USD and Tsys ticking away from session lows through the NY cash equity open.

• Tsy yields are still 0.5-5.0bp higher across the curve, with he steepening them intact, but are as much as 5bp off session highs.
• Tsys trade away from weakest levels of the session against both Bunds and gilts.
• Little in the way of overt drivers to explain the move and seems more a case of U.S. cash participant reaction to the sell off in USD assets seen in Asia/London hours.
• U.S. NEC director Hassett tried to play down the implications and appropriateness of Moody’s sovereign credit rating downgrade of the U.S., stressing that U.S. debt is the “safest on earth”, although we don’t expect this was a major market mover.