EM CEEMEA CREDIT: Romania: Spreads Set - mkt source

Prime Minister Mark Carney is announcing a major increase in military spending, committing to hitting NATO's (current) 2% of GDP spending on defence target in the 2025-26 fiscal year ending March 2026, bringing up the schedule significantly. Previous PM Justin Trudeau said that the 2% target would be hit by 2032, while on the campaign trail in May, Carney said he would advance this target to 2030 if elected. As the Globe and Mail reports, "Canadian experts have previously estimated Ottawa would require $15-billion to $20-billion in additional annual military spending to reach the 2-per-cent target."

• Carney says that Canada "should no longer send 75% of defence capital to the US", saying that defence manufacturing will use Canadian steel and aluminium.
• The PM says that the significant increase in funding will see Canada buy new submarines, ships, armed vehicles, drones, aircraft, artillery and radar systems.
• Canada's defence spending equated to 1.45% of GDP in 2024 according to NATO estimates.
• Part of the increase could come in the form of the gov'ts folding of the Canadian Coast Guard into the Department of National Defence (in line with other countries), with the Coast Guard's CAD2.5B annual budget then counting towards defence expenditure.
• Speaking at the University of Toronto’s Munk School of Global Affairs, Carney said “Broadly, we are too reliant on the United States...Now the United States is beginning to monetise its hegemony: Charging for access to its markets and reducing its relative contributions to our collective security,”

• EUR/USD: $1.1300-20(E1.5bln), $1.1370-75(E920mln), $1.1400-25(E2.1bln)
• USD/JPY: Y143.90-00($1.1bln), Y144.85-00($805mln)
• AUD/USD: $0.6420(A$771mln), $0.6460(A$529mln)
• USD/CAD: C$1.3695($869mln)

Morning update, leaning towards upside call buying after earlier selling/mixed flow. Projected rate cut pricing gains slightly vs. morning levels (*) as follows: Jun'25 steady at -0.8bp (0.0bp), Jul'25 at -4.5bp (-4.1bp), Sep'25 at -18.2bp (-17.9bp), Oct'25 at -30.5bp (-30.6bp), Dec'25 at -45.8bp (-45.9bp). 

• +4,000 SFRZ5 95.56/95.68/95.81 put flys, 2.5 ref 96.105
• +10,000 0QU5 95.62/95.87 put spds 1.5 ref 96.555
• +8,000 SFRN5 95.87/96.00/96.12 call flys, 1.25-1.5
• +2,500 SFRZ5 96.18/96.50/96.81 call flys, 3.5 vs. 96.12/0.20%
• -4,000 SFRH6 95.62 put 0.5 over 96.25/96.62/97.00 call fly
• +2,500 0QN5 97.62/98.25 call strip, .75
• -7,500 0QZ5 97.25/97.50 call spds 0.5 over 96.37/96.62/96.87 call flys
• -10,000 SFRH6 95.68 puts, 6.5 ref 96.29
• -10,000 0QQ5 96.87 calls, 4.0 vs. 96.565/0.26%