EUROPEAN INFLATION: Expected Services Uptick Shouldn't Change Broader Narrative

Reuters reports that Britain, France and Germany, the ‘E3’ signatories to the 2015 Iran nuclear deal, “are likely to begin the process of reimposing UN [snapback] sanctions on Iran on Thursday.”

• The report notes that the group still maintains hope that Tehran will “provide commitments over its nuclear programme within 30 days that will convince them to defer concrete action,” according to four diplomats.
• As the US withdrew from the Iran nuclear deal during President Donald Trump’s first term, Washington has no direct input into the snapback mechanism. If the E3 chooses to trigger the snapback, then punitive UN sanctions on Iran's financial, banking, hydrocarbons, and defence sectors will take effect in 30 days.
• The Reuters report supports a piece from Bloomberg earlier, which noted that the E3 will “maintain contacts in coming days” after talks on Tehran’s nuclear program concluded in Geneva on Tuesday without a breakthrough.
• Iranian foreign ministry spokesperson Esmaeil Baghaei told state television today that Iran wants to “make use of all diplomatic capacities” following Tuesday’s meeting in Geneva, per Bloomberg. 

2s30s briefly tops 130bp, registering the highest level seen since January ’22.

• The ’22 high (133.8bp) presents the next upside level of note in the spread.
• Moves comes as OATs lead a leg of weakness in long end EGBs.
• Meanwhile, although NY Fed President Williams stresses that the risks to the labour market and inflation are moving closer towards being balanced, along with each Fed meeting being “live” and the need to bring rates down over time, he doesn’t make a strong case for a rate cut in Sep, leaving OIS pricing for that meeting little changed at ~22bp of easing.

• 5,700 SFRU5 96.00/96.06/96.18/96.25 call condors 0.5 ref 95.89 at 0846:01ET