GILTS: Goldman Continue To Favour 10y10y Gilts Vs. U.S. Tsys

Option desks reported better SOFR put volumes on net overnight, aside from large Jun'25 Call condor, Treasury options muted but focused on Jun'25 10Y calls. Underlying futures lower, paring back a portion of Monday's gains (TYM5 currently 111-23, -6) ahead of today's data that includes JOLTS Job Openings (1000ET); Pres Trump to tout first 100 day performance from MI. Projected rate cut pricing softer vs. late Monday levels (*) as follows: May'25 at -2.3bp (-2.7bp), Jun'25 at -16.9bp (-17bp), Jul'25 at -37.6bp (-38.1bp), Sep'25 -57.4bp (-58.7bp).

• SOFR Options:
  • 21,000 SFRM5 95.87/96.00/96.25/96.37 call condors
  • 15,400 SFRM5 95.75/95.81 put spds ref 95.895
  • 11,400 SFRM5 95.68 puts, 0.5 last
  • over 5,900 SFRZ5 95.62 puts, 3.5 last
  • 12,580 SFRZ 95.56/95.68/95.81 put flys ref 96.575
  • 2,500 0QZ5 97.00/97.50 call spds ref 96.935
  • 1,850 SFRK5 95.81/96.18 1x2 call spds ref 95.885
• Treasury Options:
  • 6,300 TYM5 113/116 call spds ref 111-27.5
  • over 4,300 TYM5 114 calls

Finance Minister Kyriakos Pierrakakis, speaking to ERT, has said that the gov't will request the European Commission exempts Greece's 2026 defence spending from the Union's Stability and Growth Pact assessments that determine whether a country is placed under the excessive deficit procedure conditions. 

• Pierrakakis says the request comes as part of the 'fiscal escape clause' that sees increase gov't spending exempted from the EDP calculations if the new money goes towards defence spending as part of its 'ReArm Europe' strategy.
• Pierrakakis: "The increase [in spending] planned from 2025 to 2026 is approximately half a billion euros [0.3% of GDP] that has been planned and this also concerns the following years. There is a very specific defence spending program that we have presented as a government,”
• Under the proposed escape clause rules, a member state would be allowed to increase defence spending by up to 1.5% a year for four years without this counting towards the 3% of GDP budget deficit limit set out in the SGP.
• For a number of EU countries the concern over how or if to increase defence spending has not come down to the permissions granted by the 'escape clause', but by the possible adverse reaction from financial markets should the increased spending not be viewed as sustainable.
• Reports suggest Germany has sent its own letter to Brussels requesting an exemption. 

• In the FI space, Bund futures have pulled back from their recent highs. Despite the latest move down, a bull cycle remains in play and the sell-off between Apr 7 - 9 is considered corrective. Attention is on resistance at 132.03, the Apr 7 high and a bull trigger. Clearance of this level would confirm a resumption of the uptrend and open 132.56, the Feb 28 high. Firm support lies at 130.70, the 20-day EMA.
• Gilt futures are holding on to their latest gains. The recent rally marks an extension of the recovery that started Apr 9. 92.63, the Apr 8 high, has been breached, exposing 93.44, the 76.4% retracement of the Apr 7-9 sell-off. A break of this level would strengthen the current bull cycle and open 94.50, the Apr 7 high and a key resistance. On the downside, support to watch is 92.30, the 20-day EMA.