EURIBOR OPTIONS: Mid-curve Call Fly

Bund has caught up with Tnotes, with the US 10yr hovering at its session low, the Tnotes/Bund spread is still a touch wider in early trade.

• Support in TYU4 is unchanged and still seen further out, down to 110.01+.
• For Bund, initial support is still at 131.97.

This helps keep the USDJPY close to the 160.00 handle, so far printed a 159.93 high.

Italian Prime Minister Giorgia Meloni is delivering the customary PM's address to parliament ahead of a European Council summit. Meloni says that "I don't think citizens' voters in the EU elections are currently being considered in negotiations for EU's top jobs", adding that the "new EU Commission risks being supported by a fragile majority [and] will face difficulties in the future."

• Despite these comments, MNI's Policy team reported that Meloni "...has agreed to support Ursula von der Leyen’s bid for a second term as European Commission president in return for a high-ranking job for Italy in the new Commission, a source close to the Italian government told MNI." (see 'MNI: Meloni To Back Von Der Leyen In EU Commission Deal-Source', 24 June)
• The centrist bloc backing VdL for a second term as Commission president (centre-right EPP, centre-left S&D, liberal RE) at present commands 399 seats in the 720-member European Parliament.
• While this may appear a comfortable majority, party discipline in the EP is weaker than in national parliaments, and a sizeable number of S&D and RE MEPs may vote against VdL for another term.
• This is where the support of Meloni's conservative ECR group could come into play. With Meloni's backing, VdL could win another term, but it risks alienating those on the centre-left.
• It should be noted that Meloni's comments are directed at a domestic audience. As has been the case throughout her premiership, when it comes to EU matters Meloni has been much more pragmatic in Brussels meetings than her rhetoric would suggest.