EUROZONE DATA: PPI Surprises Higher, Ex-Energy Continues Uptrend

• Crude has fallen today amid various signs of progress towards a deal that could see the Strait of Hormuz reopen. The move down gained momentum after Bloomberg reported that Iran is considering allowing European nations to remove mines from the Strait of Hormuz.
• This would represent a potential climbdown by Iran that could form part of a deal to normalise shipping in the waterway, Bloomberg says. Iran has previously said it would not allow foreign countries to join de-mining efforts.
• WTI Sep 26 is down by 5.7% at $75.7/bbl.
• US Treasury Secretary Bessent said that there may be an Iran deal tomorrow to open Hormuz, while a source told Al Arabiya a deal could come within hours, or tomorrow.
• Officials familiar with the accord said vessels heading into the Gulf will transit a channel controlled by Iran, and close to its coast. Ships leaving will travel on a channel near Oman. Iranian officials say no tolls will be charged but the agreement includes a “service fee,” with revenues split equally between Iran and Oman.
• Today’s move lower has seen price pierce initial key pivot support at $80.05, the 50-day EMA, narrowing the gap to next support at $73.35, a Fibonacci retracement.
• Elsewhere, precious metals have risen amid the improvement in risk sentiment, with spot gold up by 0.8% at $4,088/oz.
• For gold, firm resistance is at the 50-day EMA, at $4,184.6, a clear break of which is required to signal a possible short-term reversal.

Projected rate hike pricing consolidating vs. late Monday levels (*): Sep'26 at +14.5bp (+16.5bp), Oct'26 at 20.9bp (23.9bp), Dec'26 31.8bp (+35.6bp), Jan'27 34.9bp (39.4bp).

• +5,000 SFRU6 95.87/96.00 put spds, 1.0 ref 96.14
• +2,000 SFRH8 95.00/96.00/97.00 2x3 iron flys, 81.5-82.0 ref 96.00
• +4,000 SFRU6 96.25 calls 1.25 over 2QU6 96.37 calls
• -2,000 SFRQ6 96.00 straddles 10-9.75 ref 96.145

Additionally it’s likely the statement will retain the portion of the guidance that mentions potential future increases will be considered in light of factors including various issuance profiles; this is seen as a hint that future increases will be concentrated more at the front-end, with some analysts eyeing risks that the new guidance paragraph could make even more explicit suggestions as such.

• Bills: Treasury is likely to guide to a pullback in 4-/8-week bill issuance in late August/early September (which includes a quarterly tax date) before increasing again by October - matching the usual seasonal pattern.
• Buyback Announcement: It’s most likely Treasury will again announce quarterly buybacks including $38B for liquidity support and $25B for cash management again.
• Other topics to watch: Treasury asked primary dealers about changing the structure of 7Y auctions which could move to a schedule that includes new quarterly issuance with reopenings. Additionally there could be follow-up on a proposal to allow Treasury to invest excess cash from the TGA into the repo market, in part to reduce reserve and therefore repo market volatility.
• Upcoming Supply: August’s auctions begin with the anticipated refunding: Aug 11 with $58B in 3Y Note, Aug 12 with $42B in 10Y Note, and Aug 13 with $25B in 30Y Bond.
• Monthly Auction Review: July’s coupon auctions were mixed, with no clear underperforming segment of the curve, and no aggressively strong or weak individual auctions. The 2-, 3-, 10- and 30-year lines saw modest trade throughs, while the 5-, 7- and 20-year lines tailed.