OPTIONS: Expiries for May30 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1200-05(E530mln), $1.1250(E914mln), $1.1340-50(E945mln), $1.1475(E648mln)
- USD/JPY: Y140.00($2.8bln) Y143.00($3.4bln)
- AUD/USD: $0.6400-10(A$504mln), $0.6500(A$541mln)
- USD/CAD: C$1.3900($755mln), C$1.4500($1.3bln)
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ECB: Stournaras Cautious On Rates Below 2%
Comments from Bank of Greece Governor Stournaras, via BBG:
- “Markets are pricing in further reductions, but I believe that we should be cautious due to the very high uncertainty that prevails,”
- The deposit rate — currently 2.25% — is expected to be decreased to 2%, he said. That would mean just one more quarter-point move by the ECB, whereas investors are pricing two or three more of that size by year-end.
A little more cautious on the idea of cuts below 2% than some may have expected - Stournaras is one of the most dovish members of the Governing Council. There wass little material reaction in ECB-dated OIS rates to the comments - July implied rates have risen ~0.5bps. ECB-dated OIS continue to fully price a 25bp cut through June, with 13.5bps of sequential easing priced through July.
The latest MNI Policy Team sources piece, released this afternoon, explored the lively debate amongst the Governing Council ahead of the June decision.
US TSYS: SOFR/Treasury Options Update: Upside Calls
Upside call volume gaining as underlying futures see-saw near midmorning highs (TYM5 +7.5 at 112-04.5). Curves mildly steeper (2s10s +.183 at 51.117). Projected rate cut pricing rising in the second half of the year compared to this morning's levels (*) as follows: May'25 steady at -2.3bp, Jun'25 at -16.3bp (-16.9bp), Jul'25 at -38.6bp (-37.6bp), Sep'25 -60.5bp (-57.4bp).
- SOFR options:
- -15,000 SFRN5/0QN5 96.12/96.25 call spd spd, 1.25 net steepener
- +10,000 SFRZ5 96.75/97.25 call spds, 14.25 ref 96.645
- -8,000 0QM5 96.87/97.00/97.25/97.3 call condors, 2.87 ref 96.98
- +2,500 0QM5 97.50/98.00/1000 2x3x1 call flys 7.0 vs. 96.365/0.14%
- Treasury Options:
- +15,000 wk2 TY 112.75 calls, 21
SPAIN DATA: Slightly Weaker Than Expected GDP In Q1; Consumption Growth Slows
Spanish Q1 flash GDP was slightly weaker-than-consensus at 0.6% Q/Q (vs 0.7% cons). Q4’s reading was also revised a tenth lower on a rounded basis to 0.7%. While Spain will likely remain the Eurozone growth outperformer in Q1 (German, French and Italian prints are due tomorrow), there are some signs of softening domestic consumption. This may limit sequential growth rates going forward, particularly against a backdrop of heightened uncertainty. Analysts current expect steady 0.5% Q/Q prints through Q3 2026, according to forecasts submitted to BBG. Annual GDP growth was 2.8% Y/Y, below the 3.1% consensus and 3.3% prior.
- Domestic demand contributed 0.4pp to the Q1 quarterly rate, with external demand the remaining 0.2pp.
- Consumption growth was 0.4% Q/Q (vs 0.9% prior), the softest sequential rate since Q4 2023. This is consistent with somewhat softer retail sales momentum in recent months.
- Gross fixed capital formation was 1.1% Q/Q (vs 3.5% prior), but this is a volatile category. Government consumption rose 0.2% Q/Q for the second consecutive quarter.
- On the external side, exports grew 1.0% Q/Q, but this was solely driven by 3.5% Q/Q growth in services exports – likely tourism related as parts of Spain recovered from the devastating floods in Q4. Goods exports fell 0.3% Q/Q, so no signs of tariff front-running there.
- Imports rose 0.7% Q/Q, with services growth at 2.7% and goods growth at 0.2%.
- Looking at the production breakdown: Industry value added was 1.1% Q/Q, while services slowed by six tenths to 0.3% Q/Q.
- Total hours worked fell 0.5% Q/Q in Q1, allowing real productivity per hour worked to grow 1.1%.
