UK: Gov't Expects Deal w/US On Car & Aerospace Tariffs In Force By End-June

Upward pressure in long-end German yields has stalled over the past ~90 minutes, with EU-bond supply in the rear-view and brent crude prices softening to fresh session lows. 

• USTs meanwhile continue to weaken, with 10- and 30-year yields now up ~8bps on the session, the latter now at 5.03%.
• The 10-year UST/Bund spread has widened back to 191.5bps. The spread reached a session and multi-week high of 192.7bps earlier this morning.
• Fed’s Bostic has re-iterated that he only sees one rate cut this year (see above for a selection of headlines and commentary).

Atlanta Fed’s Bostic (non-voter) said to CNBC early this morning that Friday’s Moody’s downgrade of the US could have a ripple through the economy but he still leans “much more” to just one rate cut this year.

• "*BOSTIC: US DOWNGRADE COULD HAVE A RIPPLE THROUGH THE ECONOMY"
• *BOSTIC: TREASURY MARKETS ARE STILL FUNCTIONING QUITE WELL” - bbg

“*BOSTIC: I'M LEANING MUCH MORE INTO ONE RATE CUT THIS YEAR” - bbg
This is a repeat of his prior view, having reiterating just last week that he sees only one rate cut this year, but we're repeating here following the earlier comment on the US downgrade potential ripple effect.

• “*BOSTIC: HAVE TO WAIT 3-6 MONTHS TO SEE HOW UNCERTAINTY SETTLES
• *BOSTIC: IF TARIFF TRANSITION LONGER, MAY IMPACT CONS. BEHAVIOR
• *BOSTIC: I WORRY A LOT ABOUT THE INFLATION SIDE OF OUR MANDATE
• *FED'S BOSTIC: NOT HEARING THAT LARGE LAYOFFS ARE IMMINENT
• *BOSTIC: AS THINGS GET MORE EXPENSIVE, IT WILL AFFECT INVESTMENT
• *BOSTIC: TARIFFS ON CHINA ARE STILL ECONOMICALLY SIGNIFICANT" - bbg

Recall Friday's remarks (taken from a Bloomberg Odd Lots podcast interview conducted Wed): "Our policy is going to have to anticipate - and to some extent - potentially push against those inflationary forces to the extent that we see them, so that will put a limit on where our current policy stance is". He also said last week that he expects slower growth now but for the US to avoid recession with growth of 0.5-1% this year.

• In the FI space, Bund futures remain above their recent low. The latest recovery undermines the recent bearish theme and suggests the move down between Apr 22 - May 15, has been a correction. A resumption of gains would strengthen the reversal and open 130.86 next, the May 9 high. Further out, scope would be seen for an extension towards 132.03, the Apr 7 high. Key short-term support has been defined at 129.13, the May 15 low. A break would resume the recent bear cycle.
• Gilt futures are trading lower today, extending the current bear cycle. The recent impulsive sell-off strengthens a bearish theme. The move down exposed 90.92, 76.4% of the Apr 9 - May 2 rally. This level has been pierced, a clear break of it would pave the way for an extension towards 90.47, the Apr 11 low. Resistance to watch is at 92.28, the 20-day EMA. Clearance of this level would be bullish.