EM CEEMEA CREDIT: Israel Electric Corp (ISRELE): $500mn WNG 12Y – FV

• The US dollar is the main underperformer Monday, although the USD Index is holding within Friday's range while attention was on gold trading firmly to fresh all-time highs. Geopolitics remain in focus for FX markets with the US oil blockade of Venezuela continuing and US-European-Ukraine-Russia talks ended without a breakthrough with special envoy Witkoff saying that they were “productive and constructive".
• Antipodean currencies outperform despite mixed risk sentiment on Monday. NZDUSD hovering around Thursday's 0.5788 high as markets continue to pare expectations for 2026 RBNZ tightening. More important resistance stands at 0.5831, the Dec 11 high.
• AUDUSD meanwhile remains in a bullish trend structure ahead of tomorrow's RBA minutes. The minutes will be scrutinised for more information around the board's degree of concern about upside inflation risks as well as how much this translates to the RBA's stance being skewed to the upside. Resistance stands at the 0.6686 December 10 high.
• GBPUSD narrows the gap to last week's 1.3456 highs on the back of the weaker dollar, while UK Q3 GDP came in as expected this morning. A break higher would strengthen the ongoing bull theme in GBPUSD and open 1.3527, the Oct 1 high. Initial firm support is 1.3300, the 50-day EMA. Clearance of this average would highlight a possible reversal.

Bearish momentum extended in Asia/early European trade, alongside weakness in JGBs, an uptick in oil and some typically hawkish Fedspeak from Hammack.

• Bund yields moved above 2.90% for the first time since March, but the move stalled before testing year-to-date highs (2.940%).
• Bonds have recovered from lows in the time since. German 10s last ~2.90%, yield flat to +1bp across the curve.
• Bund futures based at 126.75, with key support at the March low on a continuation chart (126.53).
• Resistance in the contract layered in at 127.24, followed by 127.52 & 127.55.
• The 10-year OAT/Bund spread trades 1bp tighter around 70.5bp. 70bp continues to limit downside. The failure to pass a budget may keep this support intact into the start of next year.
• Comments from the French Minister for European Affairs, flagging his confidence that a ’26 Budget will be agreed upon after negotiations resume in January, may be providing some modest support, but this isn’t really a gamechanger.
• ECB pricing shows ~6bp of tightening through ‘26. Comments from ECB Governing Council member Kazimir reaffirmed the Bank’s “comfortable position” albeit little leaning a little dovish on the long-term growth outlook.
• Gilts take cues from abroad. Futures based at 90.65 before recovering to 90.80.
• Support and resistance of note located at 90.50 & 91.93, respectively. Post-BoE price action tilts focus back to support levels.
• Gilt yields 1.5bp lower to 0.5bp higher, curve twist steepens. Month-to-date highs intact/untested across the curve.
• BoE-dated OIS prices ~38bp of easing through ’26, ~1.5bp more dovish on the day.

The Washington Post reports that Senator Ted Cruz (R-TX) is considering another run for the US presidency in 2028. If he does run, it would mark his second attempt to win the Republican presidential nomination, after coming in second place behind Donald Trump in 2016. WaPo reports that "Cruz has in recent months positioned himself as a loud voice for a more traditional, hawkish Republican foreign policy. [...] A White House run would be politically risky for Cruz, 55, putting him on course to collide with Vice President JD Vance, who many Republicans expect to enter the 2028 race. [...] Some political observers are skeptical that another Cruz run would gain much traction. He can no longer run as an outsider and alienated some conservatives with his fight against Trump in the 2016 campaign."

• Data from predictions market site Polymarket shows Vance as the strong favourite among bettors to win the GOP nomination, with an implied probability of 54%. Secretary of State Marco Rubio sits in a distant second place on an implied probability of 8.5%. Third favourite is term-limited incumbent Donald Trump on 4.3%, with Florida Governor Ron DeSantis fourth on 3.9%. Cruz is in fifth place with an implied probability of 3.4%.
• During his first Senate run in 2012, Cruz positioned himself as a Tea Party fiscal conservative, anti-establishment candidate, and was one of the political drivers behind the 2013 gov't shutdown. Since his 2016 presidential campaign, Cruz has become more representative of 'traditional Republican' stances on the economy (more capitalist than populist), and as a vocal supporter of Israel, in contrast to some wings of the MAGA movement. 

Chart 1. Predictions Market Implied Probability of Winning 2028 Republican Presidential Nomination, %

Source: Polymarket