STIR: Large May'25 SOFR Put Condor Sale

Senator Tim Kaine (D-VT) said that former Senate Republican Leader Mitch McConnell (R-KY) indicated that he will vote yes on a Democratic resolution that would "undo" President Donald Trump's tariffs on Canada by challenging the national security justification for their imposition, according to NBC News' Frank Thorpe on X. The resolution is seen as a message exercise as House Speaker Mike Johnson (R-LA) would kill the bill in the House, should it pass the Senate. 

• For the resolution to pass, Democrats will need at least four Republican votes. Senator Rand Paul (R-KY) and moderate Senators Susan Collins (R-ME) and Thom Tillis (R-NC) have indicated they will vote yes.
• The vote, which will come later today after being punted from yesterday's schedule by Senator Corey Booker's (D-NJ) marathon speech, will put Republicans representing farm and manufacturing states in a challenging position, with polling suggesting that voters are sceptical of Trump's tariffs.
• Republican Senators may feel slightly more emboldened to oppose Trump's agenda after elections in Florida and Wisconsin yesterday provided warning signs that Independents and moderate Republicans are unconvinced by the early period of Trump's administration and the influence of advisor Elon Musk.
• Recognising that a significant Senate Republican rebellion could undermine his 'Liberation Day' announcement, Trump has issued two lengthy statements on Truth Social directly calling on Republicans to oppose the resolution. 

• On today's market outcomes from the tariffs announcement, Deutsche Bank write that it is hard to see an outcome where we see material and sustained upside for equities.
• They write that even if tariffs are perceived to be on the lenient side, there remains a high degree of uncertainty over how various counties will respond and whether Trump will be more aggressive over time.
• Deutsche Bank see the broader USD reaction as likely to be led by equities and therefore see greater downside risks for the USD, led by the JPY and gold.

Long end ASWs a little weaker on the day alongside the sell off in outright bonds detailed recently.

• Bund & Buxl ASWs have failed to push meaningfully above levels that prevailed ahead of the “whatever it takes” German fiscal moment, while Bund yields haven’t broken below the lows witnessed since the German fiscal loosening was table, pointing to new ranges being established as Germany moves to a new fiscal framework.