ITALY AUCTION PREVIEW: On offer next week

Omani Foreign Minister Badr Albusaidi has announced on X that the fifth round of US-Iran nuclear talks will take place in Rome, Italy, on Friday, May 23. 

• The talks come as US and Iranian officials clash over Iran’s ability to continue enriching uranium for civilian nuclear purposes. Senior Iranian officials, including Iran’s supreme leader Ayatollah Ali Khamenei, have asserted their right to retain the enrichment programme within the parameters of a new deal.
• The US side - initially open to the idea - appears to have pivoted to a more hardline position on enrichment following pressure from Iran hawks within the Trump administration and Congress.
• Iranian Foreign Minister Abbas Araghachi said a short time ago - before Albusaidi's announcement: “Enrichment in Iran will continue; with or without agreement. We are considering whether or when to participate in the next round of negotiations. We are still examining whether fruitful negotiations can take place on that date and at that location,” per Laura Rozen at Diplomatic.
• Gregory Brew at the Eurasia Group noted earlier that Secretary of State Marco Rubio was “careful not to say explicitly that a deal hinges on zero enrichment” during testimony to US Congressional panels this week.
• Brew adds that US President Donald Trump’s special envoy Steve Witkoff said “enrichment was a "red-line." [but] Iranians claim he is saying something different during talks.”

Surging Tsy quarterly futures roll volumes from June'25 to September'25 outlined below. The 5Y continues to lead volumes with nearly 1M so far, the roll approximately 20% complete ahead the "First Notice" date on May 30. Current roll details:

• TUM5/TUU5 appr 267,100 from -9.12 to -8.5, -8.62 last, appr 10% complete
• FVM5/FVU5 appr 997,400 from -3.75 to -3.0, -3.25 last, appr 20% complete
• TYM5/TYU5 appr 530,900 from -1.5 to -0.5, -0.75 last, appr 16% complete
• UXYM5/UXYU5 appr 145,300 from 3.75 to 4.0, 3.75 last, appr 7% complete
• USM5/USU5 appr 183,100 from 10.0 to 12.75, 11.5 last, appr 11% complete
• WNM5/WNU5 appr 98,500 from 6.0 to 6.75, 6.25 last, appr 8% complete
• Reminder, June futures won't expire until next month: 10s, 30s and Ultras on June 18, 2s and 5s on June 30. June Tsy options, however, expire May 23.

Tsy futures remain weaker ahead of the $16B 20Y bond auction (912810UL0) at 1300ET, WI is currently at 5.035%, 22.5bp cheap to last month's stop. Today's results will be available shortly after the competitive auctions closes at 1300ET.

• April auction recap: the $13B 20Y Bond auction re-open (912810UJ5) traded 0.4bp through, with a high yield of 4.810% vs a 4.814% When-Issued yield at cutoff. This was a smaller trade-through than prior (1.4bp in March), but was the 3rd in the last 4 auctions.
• As with the trade-through, the main peripheral statistics were weaker than March's but overall largely in line with the past 5-auction average: bid-cover of 2.63x (5-auction average 2.56x) and primary dealer takedown 17.0% (15.5% avg).
• Indirects took a relatively high 70.7% (66.6% avg), the highest in 8 auctions and a potential signal of foreign demand for the Bond - with directs taking a lesser 12.3% (18.0% avg).