CROSS ASSET: Long End Yields Rise Further And Equities Off Post-Decision Highs

ECB President Lagarde's speech opening the Sintra symposium is here:

• Echoing her comments at the ECB's June meeting press conference: "Some have characterised our rate increase earlier this month as an “insurance hike”. That is not an accurate description. We faced an outlook of rising headline and core inflation, and a projection that saw inflation returning to 2% only in the last quarter of 2027, which was itself conditional on monetary policy adjusting. Our analysis showed that holding interest rates constant would have left inflation north of 2% in 2027 and 2028. This was a decision based on what we saw in front of us. And our ability to take it with confidence, in an environment of considerable uncertainty, is the product of years of investment in our data, our indicators and our projections."
• As for the current situation in the Middle East, "The conflict has generated significant inflationary pressures. But at every stage, judgements about its length, depth and implications for the outlook have shifted...Following last week’s interim peace agreement, prices have fallen back to around USD 73 per barrel, though the durability of this agreement is far from assured."
• She says the ECB no longer needs "complex forms of forward guidance", with interest rates no longer at the effective lower bound and shocks more likely to fall on the supply side. “In times of uncertainty, forward guidance loses its value. But framework guidance becomes more valuable". “When markets understand how we will respond across different states of the world, they can begin adjusting before we need to act."
• "Here there is an important distinction between forward guidance, which we have set aside, and framework guidance. Our rate decisions are guided by three criteria: the inflation outlook, underlying inflation dynamics, and the strength of monetary policy transmission. Because this reaction function is by now well understood by markets, they do not wait for us to act. They adjust financial conditions in response to new data on their own."
• “While we are more likely to face shocks that push inflation away from target, the resilience Europe has built means their effects on our economy are more contained...We may therefore more often find ourselves in an intermediate zone, between shocks we can look through and those we must react to forcefully.”

SOFR & Treasury options trade outlined below: two-way wing trades and vol sales on decent volumes far early summer trade. Underlying futures mildly lower for the most part, curves twist flatter with the short end underperforming (2s10s -1.046 at 26.3914; 5s30s -1.812 at 71.566). Projected rate hike pricing gains slightly vs. late Friday levels (*): Jul'26 at +7.7bp (7.5bp), Sep'26 at +19.5bp (+18.1bp), Oct'26 at +24.4bp (+23bp), Dec'26 +33bp (+30.5bp).

• SOFR Options:
  • +10,000 SFRZ6 96.50/96.75 2x3 call spds, 0.75 ref 95.98
  • -6,000 SFRZ6 95.81/96.31 strangle, 18.5 ref 95.975
  • +10,000 SFRN6 96.25 calls, 0.75 ref 96.10
  • -10,000 SFRU6 95.68/95.93/96.18 put flys, 6.25
  • -4,000 SFRH7 96.50 calls, 11.5
  • -12,000 SFRV6 96.00/96.37 1x2 call spds 8.25 vs. 95.99/0.14%
  • +2,000 SFRU6 96.25/96.37 call spds, 3.0 vs. 96.115/0.14%
  • -4,000 SFRN6 95.87/96.00/96.12 put flys, 2.5 ref 96.12
  • -3,000 SFRH7 96.00 straddles, 57.5
  • Update, over +10,000 SFRZ6 95.62/95.75/ 96.06/96.18 put condors, 4.75
  • +4,000 0QZ6 96.25/96.50/96.75 call flys, 0.75 over 8,000 97.50/98.00 call spds ref 96.145
  • +3,000 SFRQ6 96.87 calls, 0.75 ref 96.11
  • +2,000 SFRQ6 96.18/96.25 call spds, 2.25 ref 96.115
  • +1,000 OQN6 95.62/96.00/96.37 Iron fly, 14.0 ref 96.05
  • 2,200 SFRV6 96.18/96.37/96.56 call flys, 3.0 ref 95.985
  • +5,000 SFRH7 95.12/95.50/95.75/95.93 broken put condors, 2.25 ref 95.95
  • 2,000 SFRZ6 95.62/95.75 put spds
  • 2,000 SFRU6 96.25/96.37 call spds ref 96.115
  • 4,200 SFRV6 95.37/95.50/95.68 broken put flys, 2.25 ref 95.985
  • 3,000 0QN6 96.12/96.31 call spds vs. 95.93 puts, 1.0 net vs. 96.065/0.20%
• Treasury Options:
  • 5,000 TYQ6 108.5/109.5/110 broken put flys ref 110-05.5
  • +7,500 TYU6 108.5/109.5/111/112 2x1x1x2 iron condors, 2 net vs. 110-10/0.05%
  • 2,000 TYQ6 106.5/108.5 put spds
  • +2,500 TYQ6 111 calls, 13 ref 110-13 to -14
  • 1,800 FVU6 106.5 puts, 17 ref 107-08.75
  • +2,500 wk1 TY 110/110.5 strangles, 17 vs. 110-10/0.04%
  • 3,800 TYQ6 110 calls, 24 last
  • +5,000 wk1 FV 106.5/106.75 put spds, 1.5
  • +3,500 FVU6 107.5 calls, 27.5 vs. 107-07.5/0.43%

• RES 4: 187.95 High Apr 17 and the bull trigger   
• RES 3: 187.56 High Apr 30
• RES 2: 186.56 76.4% retracement of the Apr 17 - May 6 bear leg  
• RES 1: 185.40/186.32 High Jun 22 / High Jun 16 and 17
• PRICE: 184.97 @ 16:46 BST Jun 29
• SUP 1: 183.17 Low Jun 24
• SUP 2: 182.05 Low May 06 and a bear trigger
• SUP 3: 181.87 Low Mar 16
• SUP 4: 180.81 Low Feb 12 and a key M/T support  

EURJPY has recovered from last week’s low. Despite recent gains a potential bear threat remains present. Last week’s initial move down resulted in a breach of 184.01, the Jun 8 low. This signals scope for a deeper retracement towards 182.05, the May 06 low. Initial firm resistance to watch is 185.40, the Jun 22 high. A break of this level would reinstate the recent bullish theme and refocus attention on key S/T resistance at 186.32, the Jun 16 and 17 high.