EU CONSUMER STAPLES: Haleon; Moody's upgrade

Secured rates softened for a second consecutive session Monday, with SOFR dipping by 1bp again to 4.33%, matching the lowest levels of the month. 

• Rates could soften a little further today with cash returning to market due to bill redemptions which should help the downward drift in rates.
• Meanwhile, effective Fed Funds rates were once again unchanged.

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.33%, -0.01%, $2505B
* Broad General Collateral Rate (BGCR): 4.32%, -0.01%, $960B
* Tri-Party General Collateral Rate (TGCR): 4.32%, -0.01%, $931B

New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume:  $105B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume:  $292B
 

JP Morgan no longer expect the Riksbank to cut rates in June, now forecasting policy rates to remain steady at 2.25% through their forecast horizon. This is JPM's second forecast revision since the Janaury 29 Riksbank decision, after they removed a March cut from their forecast in February in response to the much higher-than-expected January flash CPI data.

• JPM note that "expectations of significant fiscal stimulus combined with recent upside inflation surprises should keep the Riksbank on hold for an extended time".
• Specifically, last week's German/EU fiscal announcements have led to upward Swedish GDP revisions of 0.5%-pt saar in 2H25 and 0.75%-pt in 2026.
• "In Sweden, we apply a 0.4 beta to the growth revision for Germany, higher than the 0.25 average for Euro area countries. This owes to the manufacturing industry being closely tied to Germany. In addition to higher infrastructure, there will be some lift from defense spending although the impact here is likely to be small".
• "Somewhat tempering the beta is the intensification in the trade war, which may hit Sweden harder given the manufacturing sector’s large exposure".
• "While defence expenditure is already set to increase significantly in coming years, we expect more to come. We predict military spending will increase to 2.8% of GDP in 2025 and 3.2% in 2026 (vs. 2.4% for both years previously). We assume fiscal multipliers of 0.3 in 2025 0.6 in 2026".

Treasury sells $58B in 3Y Note (CUSIP: 91282CMS7) at 1300ET today in the first coupon auction of the month.

• February's 3Y sale was strong, seeing the first trade-through (1.2bp) in 5 auctions, with a bid-to-cover of 2.79x the highest since 2023, and 10.2% primary dealer takeup the lowest since 2023.
• Since then, though there has been a reduction of concession, with yields dropping sharply alongside an equity sell-off / rising recession concerns, with the curve bull steepening.
• The current when-issued yield of 3.90% is a solid 40bp below the February auction's high yield, and would be the lowest at auction since October 2024.
• Even apart from that, 3s are trading a little richer vs the short-end/belly, with the 2s-3s-5s fly at -8.7bp around the lowest levels of the year (and vs near-flat in early February). 3s10s is at 34bp, near the steepest levels since early 2022.

• The 5-auction averages and latest 3Y auction results are below.