TARIFFS: IEEPA Supreme Court Ruling Possible At 10am, Nuances Could Be Key

Core global FI markets have stabilised off session lows after demand came in around round number yields in 10-Year Tsys and Bunds (4.20% & 2.90%). 

• Softer-than-expected U.S. ECI data will have also provided some demand.
• Fresh downside in crude oil could be providing some modest cross-market support in recent trade, but recoveries in Tsys & EGBs remain tepid at best at this stage, after the recent run of hawkish repricing in EUR short end drove a meaningful adjustment in global yields in the first half of the week.
• North American central bank decisions are set to dominate during the remainder of the session.

Buxl swap spreads & ASWs have been resilient during this week’s sell off in bonds and trade little changed on the week. Hawkish ECB repricing in the short end has translated into a fairly uniform shift higher in both long end bond yields and swap rates.

• Note the resilience in spreads also comes despite some flattening on the EUR 10s30s curve, which is largely being attributed to potential liquidation in steepener positions, a widely favoured position centred on the impending transition of the Dutch pension fund sector (which will generate the liquidation of long end received positions).
• The DFA annual issuance plan presents a domestic focal point and is due to be released on Thursday of next week. Our issuance team will outline expectations ahead of that event.

• 7,000 FVH6 108/108.75 2x1 put spds
• 1,757 FVF6 109.25/109.5 call spds