GILTS: Flat After GDP

• Some early small widening in the spreads versus the German 10yr, most of the developed countries sits wider, the BTP/Bund spread is still finding support ahead of the big initial 90.00bps level.
• But worth Watching how the Tnotes/Bund spread develops from here, the ~195.73bps level has provided some decent resistance, which also coincide with the 76.4% retracement of the February/April range at ~196.3bps.

(Chart source: Bloomberg Finance LP/MNI).

Former special government employee Elon Musk posts on his X platform: "I regret some of my posts about President [Donald Trump] last week. They went too far."

• The spectacular explosion in the relationship between Trump and Musk, who set up the 'Department for Government Efficiency' (DOGE) and donated hundreds of millions of dollars to Trump's re-election campaign, became a major political talking point last week. After Musk criticised Trump's 'One Big Beautiful Bill', the two men traded barbs with Trump criticising Musk during an Oval Office meeting with German Chancellor Friedrich Merz and calling Musk 'crazy' on his Truth Social platform. Musk said Trump was ungrateful and insinuated that Trump was implicated in the files of Jeffrey Epstein, the disgraced financier who died in jail awaiting sex trafficking charges.
• Trump has previously said he is not interested in resuming ties, but on 9 June said, “We had a good relationship, I wish him well, very well".  Musk has shown signs of contrition in recent days with posts on X supportive of Trump's actions in taking a hard line against rioting in Los Angeles and deleting incendiary past posts.
• Given the significant impact Musk's presence had on the landscape of US politics for the first few months of Trump's presidency, any rapprochement would likely be taken as a good sign by markets. CNN carries comments from WedBush: “[A]t the end of the day Trump needs Musk to stay close to the Republican party and Musk needs Trump for many reasons including a green light on a federal framework for autonomous [vehicles].”

There wasn’t a material reaction in short-end EUR rates to the latest Bloomberg source reporting on the progress of EU-US trade negotiations, nor the US-China trade framework agreed upon overnight. ECB-dated OIS continue to price one more 25bp cut through year-end. Given the cautious signals from President Lagarde’s press conference last week, alongside subsequent Governing Council commentary, implied rates appear to be stuck in a holding pattern until a new catalyst arises. Trade negotiations are the obvious risk to monitor, alongside hard data that covers the period beyond US Liberation Day.

• Euribor futures are little changed through the blues.
• The BBG story said the EU believes trade negotiations could extend beyond the July 9 deadline, with US responses to the latest round expected in the coming days. Notably, sources said that talks remain difficult, and the EU continues to prepare retaliatory measures in case no agreement is reached.
• Today’s regional calendar includes the ECB’s forward-looking wage tracker. It should confirm a downward trend in pay growth, and is unlikely to be a major market mover. At the June press conference, President Lagarde said that "the ECB’s wage tracker points to a further easing of negotiated wage growth in 2025, while the staff projections see wage growth falling to below 3 per cent in 2026 and 2027". The April vintage saw negotiated wages excluding one-off payments falling to 3.024% by Q4 2024.