IRAN: "*IRAN FOREIGN MINISTRY SAYS NO FINAL UNDERSTANDING REACHED: IRNA" -bbg

• +8,000 FVQ6 106.75 puts, 28.5 ref 107-21.75 at 1252:51ET

Seasonally-adjusted Bundesbank CPI data released this afternoon shows no feedthrough of higher energy prices to aggregated core momentum as of April.

• Core momentum (defined here as 3m/3m seasonally adjusted annualized rate) edged up marginally to 2.0% in April, from 1.9% in April which had been the joint lowest rate since December 2020.
• However, in M/M terms, core advanced a mere 0.08% this month after 0.25% in March and 0.17% in February.
• Services momentum eased in April to 2.4%, the lowest rate since August 2022 after 2.7% in March. On a sequential comparison, services printed 0.17% M/M for the third consecutive month in April.
• Core goods momentum meanwhle increased to 1.3% in April, the highest since November but with the pickup from March's 1.0% driven by base effects as March also saw a timid 0.08% M/M increase (0.17% March).

European rates continued to sell off ahead of Thursday's central bank decisions.

• Once again it was higher energy prices on the back of adverse Middle East developments that saw early weakness across EGBs and Gilts, with reports overnight that US President Trump has instructed aides to prepare for an extended blockade of the Strait of Hormuz.
• Those reports were somewhat corroborated just before the European cash close by Trump himself (Axios: "President Trump told Axios he's going to keep Iran under a naval blockade until the regime agrees to a deal that addresses U.S. concerns about its nuclear program").
• Also helping drive UK yields higher was an uptick in political risk premia on renewed speculation of a future leadership challenge to PM Starmer, by Greater Manchester Mayor Burnham.
• Helping Bunds somewhat was the lowest German core CPI Y/Y reading since 2021 on soft services and a below-expected HICP, though energy's acceleration was a concern; Spain HICP was slightly above-expected, with core CPI slightly below. The EC's April survey was stagflationary.
• Yields closed near their session highs, with Gilts underperforming Bunds and both the German and UK curves bear flattening. Periphery / semi-core EGB spreads continued to widen against the risk-off backdrop.
• The Fed decision will be in focus after the cash close; Thursday brings not just the Eurozone-wide April flash inflation reading, but also of course the ECB (MNI preview) and BOE (MNI Preview)
• For the BOE, we lean towards a 7-2 vote to leave Bank Rate unchanged; for the ECB, overall we still think a "measured adjustment" scenario is most likely, with Lagarde likely to keep the door to a June hike firmly open.

Closing Yields / 10-Yr EGB Spreads To Germany:

• Germany: The 2-Yr yield is up 9.3bps at 2.743%, 5-Yr is up 6.7bps at 2.836%, 10-Yr is up 4.3bps at 3.11%, and 30-Yr is up 1.2bps at 3.589%.
• UK: The 2-Yr yield is up 11bps at 4.557%, 5-Yr is up 8.7bps at 4.616%, 10-Yr is up 6.5bps at 5.071%, and 30-Yr is up 3.5bps at 5.725%.
• Italian BTP spread up 2.8bps at 84.7bps / Greek bond spread up 2.4bps at 80.1bps