STIR: Just 9bp Of Fed Cuts Priced For July With U.Mich Fully Digested

• US TSY 19Y-10M BOND AUCTION: NON-COMP BIDS $116 MLN FROM $13.000 BLN TOTAL

On Thursday, Italian Prime Minister Giorgia Meloni will become the first European leader to sit for a face-to-face meeting with US President Donald Trump since he imposed his 'Liberation Day' tariffs. On Friday, Meloni will return to Rome to host Vice President JD Vance for a state visit. 

• Politico notes: “Meloni’s personal engagement with Trump has set nerves jangling in other EU capitals. But as the bloc faces up to a potentially ruinous trade war, even her wariest counterparts are coming round to the idea that she may be the only European leader he is willing to listen to.”
• An Italian official said: “Having Trump’s ear is an asset for the entire European Union,” highlighting Meloni’s “ideological affinities with the world of American conservative right-wing politics.”
• However, as Semafor notes that Italy, “is a laggard on the key issues Trump values: Italy spends far below the European average on defense, and has a hefty trade surplus with the US.”
• Bloomberg writes: “The question for Meloni to ask is: What, if anything, does the US really want? Any hint of an answer would be of huge value to a Europe that remains stumped," noting that European Union Trade Commissioner Maros Sefcovic left a meeting with his US counterparts this week still waiting for the US to “define its position.”

Figure 1: EU Trade Balance In Goods With the United States

Source: Politico

• Treasury sells $13bn of the 20Y re-open at 1300ET (912810UJ5), in another test of duration demand although seemingly not as important as last week’s 10Y and 30Y offerings.
• Those auctions saw solid results and helped limit deleveraging pressures, including an all-time high for indirect take-up in the 10Y (assuaging fears of a slide in foreign demand) and a 2.5bp stop through for the 30Y.
• Bloomberg currently shows the WI yield at 4.8075%, off the day’s highs of 4.845% to modestly trim outright concession after the 4.632% high yield in March.
• 5s30s, an area of interest amidst deleveraging pressures of recent weeks, sits at 83bps (+3.4bp) for off last week’s high north of 95bp but holding the bulk of the steepening over the past month.
• 20Y auctions have been a mixed bag in recent months, stopping through by 1.4bp last month (largest since Jun 2024) but with a five-auction average tail of 0.6bp.
• There’s a similar story for bid-to-cover, at 2.78x in March (highest since Apr 2024) vs a five-auction average of 2.56x.
• Indirect take-up is likely again to receive attention. The 68.8% in March and a five-auction average of 66.6% weren't particularly unusual in either direction.