US TSYS: Paring Gains Ahead PCE Prices, UofM Sentiment & Inflation Data
Jun-27 10:57
- Taking cues from EGBs - Treasuries are currently trading modestly weaker, low end of narrow overnight range as rates retreat from late Thursday's near 2-month highs (TYU5 112-03). Decent volumes with the Sep'25 10Y contract just over 300k.
- Tsy Sep'25 10Y contract currently trades -5.5 at 111-27, initial technical support at 111-11+/110-25+ (Low Jun 25 / 50-day EMA). Key resistance above at 112-23 (High May 1). Curves mildly flatter: 2s10s -.121 at 51.707, 5s30s -1.243 at 99.060.
- Relative calm on the geopolitical front with Israel/Iran ceasefire holding, market focus on today's data with PCE prices kicking off at 0830ET, final U of M sentiment and inflation at 1000ET.
- NY Fed Williams starts off today's Fed speaker schedule at 0730ET - shouldn't be market moving as he chairs a closed press session at the Bank for International Settlements. Cleveland Fed Hammack & Boston's Cook will participate at a Fed listens event at 0915ET (no text, Q&A).
- Short week next week - Friday closed for Independence Day holiday - which brings the June employment data forward to Thursday - sharing the session with weekly jobless claims and factory orders and ISM services data.
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BTP: Block trade
May-28 10:46
BTP Block trade, suggest Buyer:
- IKM5 1.15k at 120.67.
EURGBP: Stretched GBP Valuation as BoE-ECB Pricing Spread Meeting Resistance
May-28 10:41
- EUR/GBP remains well within range of recent lows as the cross holds close the entirety of the tick lower off the late May high at 0.8459. This keeps short-term momentum measures pointed lower, despite the price finding support into the 0.8383 200-dma.
- We wrote a few weeks ago that a UK-US trade deal is unlikely so shift the near-term narrative for GBP, meaning any post-deal announcement strength could prove short-lived. Since then, GBP has proved more resilient than expected - so much so that the currency remains the most stretched in developed markets on a REER basis, still ahead of EUR.
- It's BoE pricing that's backing up this stretched valuation, with the Dec-25 SONIA-EURIBOR spread still in focus. However this pricing may also suggest the room for EUR/GBP to fall further here may be limited. We see that the spread may struggle to meaningfully push through resistance at 213.5bps (Jan 14 close) without a fresh re-escalation of trade tensions - which has prevented EUR/GBP from further follow-through sales, keeping EUR/GBP above this week's lows for now.
SLOVAKIA: Fico Clashes w/EU Parl't Committee & Germany's Merz On Funds & RoL
May-28 10:41
Several members of the European Parliament’s Committee on Budgetary Control are in Slovakia today as part of the committee's monitoring process to ensure the correct use of EU funds. Meetings between the committee and members of PM Robert Fico's left-wing nationalist SMER-led gov't have been described as "tense". The gov't has conducted media events criticising the "meddling" of the committee. Prominent German Green MEP Daniel Freund told Politico, “We had seen this previously when we went to Hungary in the past. That we get attacked like this is not a great sign.” The Committee will hold its own press conference at 16:00CET.
- Separately, on 26 May, German Chancellor Friedrich Merz was asked about the possible divergence of Hungary and Slovakia from EU rule of law standards, replying that “there is always the option of withdrawing European funds from them. If it is necessary, then we will deal with it.” Merz added, “We will not be able to avoid this conflict [...] if we continue on this course. We cannot allow the decisions of the entire EU to depend on a small minority. And there could certainly be clearer words and possibly also harder conflicts.”
- Afterwards, Fico lambasted Merz, saying, "The German Chancellor’s words are absolutely unacceptable in modern Europe. If we don’t obey, we’re to be punished? This is not the way to foster unity and cooperation".
- Given Slovakia's export-oriented economy and reliance on German demand and supply chains, a major flare-up with Berlin is a risky move for the Fico gov't.
