STIR: Market Moves Towards 70bp Of Fed Cuts Through Dec After ADP
Dovish adjustments in Fed pricing following the soft ADP employment report, with FOMC-dated OIS now ...
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EUROPEAN INFLATION: Analysts Continue to Centre on 2.0% Y/Y May Headline HICP
Updated analyst tracking estimates point to only slight downside risks to consensus for tomorrow's May release of Eurozone flash HICP (10:00 BST). The median estimate we've seen over the weekend of 2.0% Y/Y matches the broader Bloomberg consensus although with a few looking for a 1.9% print. MNI's tracker eyes 1.9%.
- Citi see headline 1.9% ("albeit with risks of 2.0%"), core 2.4% as national-level data came in in line with their original Eurozone aggregate forecast.
- HSBC see headline at 1.9%, core 2.4% (cutoff appears to have been ahead of the Spain and Germany results).
- Goldman Sachs see 1.95% headline, 2.37% core after German, Italian and Spanish data.
- Barclays see headline 1.96% Y/Y and core 2.43%.
- ING see headline at 2.0%, core 2.5%.
- Lloyds see headline at 2.0%, 2.4%
- Morgan Stanley see headline at 2.0%, core 2.4% "forecast revision today is probably largely attributable to airfares, but, most likely, the non-volatile components of services inflation remained relatively sticky"
- Société Générale see headline 2.0% ("risk of a slightly weaker print"), core 2.4% "most of the easing in May is likely to come from this Easter effect unwinding"
- TD Securities see headline 2.0%, core 2.4% as they "have seen disinflation continue across major member states in May".
Ahead of the EZ-wide release, the Netherlands will be the last key national-level print, scheduled for tomorrow 05:30 BST, and is expected for a 0.3pp deceleration to 3.8% Y/Y. Remember that in April, the Netherlands saw an outsized 0.7pp 'beat' in headline at 4.1%, which was driven by services inflation speeding up by 1.6pp vs March.
EGB OPTIONS: Option Package in Buxl, Bund, Bobl, Schatz
- DUU5 107.30p, sold at 21.5 in 6.75k
- DUU5 107.20p, sold at 17.5 in 6.75k.
- UBU5 119.00p, sold at 280 in 500.
vs
- RXU5 130.00p, bought for 115 in 2k.
- OEU5 117.75p, bought for 64.5 in 4k.
GILTS: Citi Still Look For Further Curve Steepening
Citi note that “the 5s30s curve has become range-bound, with a propensity to ‘twist’. It has been resistant to flattening in the May sell-off, despite the DMO’s cut to 15-Year+ issuance”.
- Theu go on to suggest that the “supply reduction may yet be undone by QT. Meanwhile, the upcoming Spending Review will likely reiterate the fiscal challenge”.
- Ultimately, they suggest that “with little left to take out of MPC cut pricing, in our view, bear-flattening pressure may fade. All in, our bias remains for further steepening well beyond the forwards”.
