OUTLOOK: Price Signal Summary - Bunds Test The Range Base

The i Newspaper reports that PM Sir Keir Starmer could pull a controversial piece of legislation intended to save the gov't GBP5bln/year by 2030 by cutting a disability benefit, the Personal Independence Payment (PIP). This comes in the face of a growing rebellion among MPs from Starmer's centre-left Labour party, with over 120 putting their names to a 'reasoned amendment' that, if passed, would scupper the gov'ts reform plans. 

• The gov't could look to continue with the reforms (as Starmer said he would earlier this morning). This would either need the number of rebels to decrease substantially, or rely on support from the main opposition centre-right Conservatives. The former seems unlikely given the groundswell of opinion among Labour backbenchers. Conservative leader Kemi Badenoch announced on 24 June that her MPs would back the legislation (enough to overcome the Labour rebels), before posting criticism of the potential withdrawal on X.
• The option of pulling the legislation (to be announced by the Leader of the Commons, Lucy Powell, on the morning of 26 June), would see it pushed back until the new parliamentary session in the autumn, when it would be reintroduced with rebels' views taken into account.
• Labour continues to trail the populist Reform UK in opinion polling, with Nigel Farage's party outflanking Starmer on the right on issues such as immigration, but on the left on welfare, leaving the gov't in a difficult position in terms of policy making. 

• In FX, the trend set-up in EURUSD is unchanged, it remains bullish. Resistance and a bull trigger at 1.1631, the Jun 12 high, has been pierced confirming a resumption of the trend. This opens 1.1685, a 76.4% retracement of the Jan ‘21 - Sep ‘22 downleg. Key short-term support to watch lies at 1.1472, the 20-day EMA. A clear break of this average is required to signal scope for a deeper retracement that would expose the 50-day EMA, at 1.1332.
• The trend needle in GBPUSD continues to point north, affirmed by Tuesday's break to a new YTD high. The move higher maintains the bullish price sequence of higher highs and higher lows. Note too that moving average studies are in a bull-mode position, highlighting a dominant medium-term uptrend. Initial support lies at 1.3499, the 20-day EMA. The key short-term support lies at the 50-day EMA, at 1.3377.
• USDJPY remains below Monday’s high. This week’s move lower undermines a recent bullish theme and Monday’s price pattern appears to be a shooting star candle formation. If correct, it signals a reversal of the recent bull cycle. Support to watch lies at 144.81, the 20-day EMA. It has been pierced, a clear break of it would strengthen a bearish threat. On the upside, a move above Monday’s high of 148.03 would reinstate a bullish theme.

• Treasuries are inching lower as US desks filter in but are little changed on the day awaiting fresh drivers, having faded an earlier modest rally that came about with limited headlines.
• President Trump has disputed a Pentagon assessment that US airstrikes only had a limited impact by delaying the Iranian nuclear program by months.
• Trump is in the Netherlands today for a pared back NATO summit.
• Cash yields are 0.5-1bp higher on the day.   
• 2s10s is mechanically steeper at 50.5bp (+3.2bp) after the new 2Y entered the benchmark after yesterday’s 2Y auction.
• 5s30s are little changed at 97.5bp (+0.3bp) having tested recent highs with 100.4bp yesterday.
• TYU5 deals at 111-18 (- 03) on modest cumulative volumes at 285k. An overnight high of 111-24 extended recent gains seen after Monday’s clearance of 111-14+.
• Resistance is eyed at 111-30 (76.4% of May 1-22 downleg) and 111-31+ (1.0% 10-dma envelope). 
• Data: MBA mortgage applications (1200ET), New home sales May (1000ET), Building permits May revisions (tbd)
• Fedspeak: Goolsbee on podcast (0800ET), Powell testifies before Senate Committee (1000ET, text + Q&A)
• Coupon issuance: US Tsy $28B 2Y FRN Note re-open (1130ET), US Tsy $70B 5Y Note - 91282CNK3 (1300ET).
• Last month’s 5Y suction was strong, with a 0.4bp trade through (its sixth trade through in the past seven auctions) and record high indirect take-up at 78.4%. Yesterday’s 2Y auction meanwhile saw a small stop (0.2bp) and a bid-to-cover at 2.58x for almost identical to the 2.57x prior.
• Bill issuance: US Tsy $63B 17W bill auction (1130ET)