ISRAEL: PM Confirms Troops Cross Litani River In Further Escalation In Lebanon

The 10-Year gilt/Bund spread trades through the year-to-date closing high (195.03bp) but is only ~2bp wider in the time since the comments from Manchester Mayor Burnham crossed.

• Support in 10-Year futures held to the tick.
• This suggests that the market is not pricing a particularly high likelihood that Burnham returns to parliament and ousts PM Starmer at some point, likely owing to recent experience, whereby his attempt to return was blocked by the Labour NEC.
• Our political risk team has also noted that all 3 of the leading soft-left candidates to replace the PM would benefit from more time elapsing before a leadership contest takes place (see recent bullets for greater details), seemingly lessening the near-term risk to Starmer’s premiership and limiting follow through in the gilt market.

The DMO has announced it will be looking to sell GBP1.6bln of the 1.125% Sep-35 linker (ISIN: GB00BT7HZZ68) at its auction next Wednesday, May 6.

• US EIA: CRUDE OIL STOCKS EX SPR -6.23M TO 459.5M IN APR 24 WK
• US EIA: DISTILLATE STOCKS -4.49M TO 103.6M IN APR 24 WK
• US EIA: GASOLINE STOCKS -6.08M TO 222.3M IN APR 24 WK
• US EIA: CUSHING STOCKS -0.8M TO 29.8M BARRELS IN APR 24 WK
• US EIA: SPR -7.12M TO 397.9M BARRELS IN APR 24 WK
• US EIA: REFINERY UTILIZATION WEEK CHANGE +0.5% TO 89.6% IN APR 24 WK