OIL: Hungary’s MOL and MVM Deal to Help Diversify Oil Supplies

Recent option flow includes:

• ERZ5 98.50/62 call spread vs. 98.31/18 put spread paper paid 0.5 for the put spread on 13K.
• ERM5 98.12/98.25 call spread paper paid 1.25 on 5K.

Speaking after a meeting of the Council of Ministers, Prime Minister Pedro Sanchez says that Spain will hit the (current) NATO defence spending floor of 2% of GDP in 2025. For several years, Spain has been NATO's most notable laggard in terms of defence spending, which is estimated to have come in just above 1.4% in 2024. The new 'Industrial and Technological Plan for Security and Defence' was approved by ministers today and will be sent to Brussels on 23 April for evaluation. 

• Sanchez: "To achieve [the 0.6% increase], we will have to make a significant investment, a significant effort of €10.471 billion in addition to what has already been allocated to  security and defence,"
• Of the E10.471bln, E3.3bln will go on a 'digital shield' to protect critical infrastructure and the military from cyber attacks. A larger proportion, accounting for 35% of the total, will go to increase wages for the armed forces.
• Just 15% of the investment will go on to fund new defence and deterrence equipment, a contribution that could draw criticism from the US and NATO's other big spenders.
• The PM claims that the investment can be funded by reorienting NextGen EU funding, " savings generated by the government's rigorous management and the good performance of economic policy," and headroom from the last approved budget in 2023.
• Sanchez claims that 87% of the investment will remain within Spain, while the bulk of the remainder will be spent in the EU, with only 5% going outside the Union. 

• Treasuries trade bear flatter as investors continue to weigh US President Trump’s latest pressure on the Fed to cut rates yesterday. It adds to the mix of the front end being under pressure from further gains for crude oil futures and $69bn of 2Y supply later on.
• Earnings are increasingly of note this week with tariff impacts eyed, including Tesla, Verizon and Lockheed Martin today before Boeing, IBM and Philip Morris tomorrow.
• Cash yields are 0.5bp to 4.5bp higher on the day, with 2s leading the increases.
• It sees some pulling back from yesterday’s latest steepening, including 2s10s at 62bp (-3bp) vs above 66bp yesterday.  
• TYM5 has recently touched lows of 110-17 (-08+), back to levels last seen on Apr 15 amidst modest volumes of 280k.
• The pullback from Thursday’s 111-17+ supports the notion that prior gains were corrective, with support seen at 110-15 (Apr 15 low) before a bear trigger at 109-08 (Apr 11 low).  
• Data: Philly Fed non-mfg Apr (0830ET), Richmond Fed mfg Apr (1000ET)
• Fedspeak: Jefferson (0900ET), Harker (0930ET), Kashkari (1340ET), Barkin (1430ET) and Kugler (1800ET) – see STIR bullet
• Coupon issuance: US Tsy $69B 2Y Note auction - 91282CMY4 (1300ET)
• Bill issuance: US Tsy $70B 6W bill auction (1130ET)