EM CEEMEA CREDIT: REPHUN: Interest rate cap challenged

Euribor futures have been dragged higher by SOFR counterparts this afternoon, now flat to +4.5 ticks through the blues. ERZ6 is +3.5 ticks at 98.215, narrowing the gap to resistance at 98.255 (April 22 high).

• European rates have largely looked through today’s flash GDP and April inflation data. Although Q1 GDP was stronger-than-expected at a rounded 0.4% Q/Q (vs 0.2% cons and prior), it was flattered by rounding and tariff-related Irish export frontloading.
• Meanwhile, country-level flash April inflation prints released so far suggest consensus for a 2.1% Y/Y Eurozone-wide headline rate (vs 2.2% prior) remains intact, with risks tilting towards a lower reading.
• Meanwhile, there appear to be upside risks to the 2.5% Y/Y EZ core consensus (vs 2.4% prior), with Easter-timing related effects apparent in Germany and Italy especially. JP Morgan and Goldman Sachs now expect a 2.6% core reading (vs 2.5% initial projection).
• ECB-dated OIS now price 66bps of easing through December, 3bps more dovish on the session.
• A reminder that most of Europe will be closed tomorrow for the Labour Day Holiday. Eurozone-wide flash April inflation is due on Friday, alongside March unemployment (cons 6.1% vs 6.1% prior). 

• US TSY 17W AUCTION: NON-COMP BIDS $736 MLN FROM $60.000 BLN TOTAL

House Speaker Mike Johnson (R-LA) has suggested that Congress could step in to moderate President Donald Trump’s trade agenda if there was an “imbalance” that encroached on the constitutional power of Congress, but stressed he would first “call the president and talk with him."

• Johnson said at an Axios event today: "I think the executive has a broad array of authority that's been recognized over the years. If it gets close to where the imbalance is there, then we would step in."
• However, Johnson tempered expectations of Congressional action in the near-term: “...three weeks into the tariff policy of this new administration? I don’t think it’s appropriate for Congress to jump in the middle of that and try to legislate.”
• The Senate could vote as soon as today on a symbolic resolution to block Trump's 'reciprocal' tariffs. The resolution will be killed in the House but a sizable contingent of dissenting Republican votes would increase pressure on GOP leadership to consider action to rein in Trump's agenda.
• Johnson also confirmed, as expected, that the debt ceiling X date is the real deadline for the ‘big beautiful’ tax and spending reconciliation bill: "That's a big pressure point... I have had to work under the assumption... that it could be the earliest date, maybe early June, so we can't be caught flat-footed on this."
• As it is likely to fall in late summer or Autumn, the X date provides breathing room for Johnson, who initially targeted Memorial Day as his deadline.