US: MNI POLITICAL RISK - Trump Will Ask Xi To "Open Up" China

• With BoE hiking expectations for June having fallen over 20bps from last month’s peak to present levels of 18bps, the risk of an upward correction will likely bubble heading into a slew of six MPC speakers this week and key UK data next week.
• Markets will gauge how close the Committee are to tightening, with Bailey likely the most pertinent speaker tomorrow given he has already alluded to market pricing for hikes getting ahead of itself. Next week's data will also be key with March CPI, the labour market report as well as the PMI, DMP & BoE's Agents' surveys all due.
• Evidence of Bailey leaning more hawkishly or a more sizeable impact of higher fuel prices in March CPI could be triggers for more hawkish repricing.
• Across the major European central banks, the repricing of the BoE’s policy rate path for 2026 has been particularly pronounced, moving from -53bps at the end of February to current levels of +47bps, having peaked at over +80bps last month.
• To date, however, even the most hawkish BoE members have wanted evidence of second-round effects before hiking.
• STIR pricing of BoE rates peaking at ~4.2% in Q1 2027 feels hawkish, but arguably not outside the realm of possibility in an environment where the 2-year inflation swap is well above 4%.

Downside in bonds accompanies the aforementioned bid in the USD, after RTRS provided details of the note to seafarers re: the U.S. blockade on vessels around the Gulf.

• The publication of the note seems to have bedded into markets how material Trump's blockade at the Gulf of Oman has become - and seems to reduce the odds of any last minute extension or reversal of the manoeuvre.
• Bunds revisit overnight session lows, which hold on the first retest, while EGB spreads vs. Bunds widen (GGBs & BTPs lead that move, 1.5-2.0bp wider on the day).
• Gilts trade through gap support at 88.03, exposing more meaningful support at 87.59.
• Meanwhile, the recovery rally in Tsys fades.
• Shift in yields are fairly parallel across core global curves.
• Gilts widen vs. both Bunds and Tsys at the 10-Year point given sensitivity/beta to energy price swings.

Confirmation of the note to seafarers on the US blockade has helped underpin the USD in recent trade, helping EURUSD ease off recovery highs and US 10y yields turn back toward the overnight high at 4.3607%. In tandem, oil prices have added ~0.30/bbl.

• The publication of the note seems to have bedded into markets how material Trump's blockade at the Gulf of Oman has become - and seems to reduce the odds of any last minute extension or reversal of the manoeuvre.
• Moves come with around two hours until the full installation of the blockade at 1000ET - which may remain a market flashpoint despite the very low chances of any shipping looking to exit the Strait before that time (we already saw two empty tankers exit today, presumably in advance of any measures by the US Navy).
• Outside of the blockade timeline, headline risk may stem for any signals that talks could be resumed - particularly after the earlier Axios story that confirmed Pakistan, among others, were looking bridge gaps between Washington and Tehran after failed negotiations at the weekend.