US-EU: Sefcovic To Hold Call Lutnick & Greer Thurs, US-EU Talks Every Other Day
European Trade Commissioner Maros Sefcovic confirms that he will speak with US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer on Thursday, 29 May. Adds that the EU has agreed to speak to the US' two seniormost trade delegates every other day. Sefcovic says that the EU is "in constant conversation with the US" on the issue of trade, saying the two sides are "looking at tariff lines and cooperation on fields like aviation, semiconductors, and steel."
- US President Donald Trump threatened 50% tariffs on the EU from 1 June, leading to a call with Commission President Ursula von der Leyen and a delay in imposition until 9 July. On 27 May, Trump said "...the E.U. has called to quickly establish meeting dates. This is a positive event..."
- While the EU will seek to reach some form of agreement with the US to avoid the imposition of 50% tariffs, the prospect of a full trade deal is slim. Politico notes, "Europe has no political appetite to revisit the nightmare of its last attempt to forge a sweeping EU-U.S. trade pact — the Transatlantic Trade and Investment Partnership." The article claims the EU "...has already offered to drop its (relatively low) tariffs on industrial goods and to team up on tackling the glut in Chinese exports. To sweeten the deal, other potential tidbits include recognizing U.S. safety standards on cars and dropping duties on American ethanol," The most feasible outcome could prove a 'thin' trade agreement similar to those agreed with the UK and China.
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US: GOP Leaders Faces Toughest Test Yet As Reconcilliation Markup Begins
Republican-led House committees will tomorrow begin marking up the massive reconciliation package that GOP leadership hopes to pass in a party-line vote before Memorial Day. The package covers the bulk of President Donald Trump’s tax, border security, and energy agenda and is likely to include a roughly four trillion-dollar hike to the federal debt limit.
- For the first time, House Republicans will ink out the specifics of huge cuts to government services they outlined in broad strokes in their budget blueprint. The cuts, including USD$880 billion from the Department of Commerce, are likely to include major reforms to safety net programmes like Medicaid.
- So far, House Republican leadership has defied expectations, forcing a series of votes through a razor-thin majority despite warnings from conservatives over deficit spending in the reconciliation bill.
- This month’s mark-ups will be a more difficult lift for leadership. House Republican cuts are likely to go beyond what is palatable for House moderates and Senate Republicans and come as Trump’s sinking approval rating flashes warning signs for frontline Republicans.
- The Treasury Department is expected to send Congress its formal projection for the so-called X-date this week. As the reconciliation package includes a debt limit hike, the X-date will provide a hard backstop for getting the package through Congress.
- House Speaker Mike Johnson (R-LA) will meet Trump at the White House at 14:00 ET 19:00 BST to discuss reconciliation. The pair may discuss the prospect of a millionaire tax as a revenue source.
BONDS: Futures remain under pressure
- The small breakout of the 131.11 initial support noted in Bund for today has provided a round of selling in US Treasuries.
Ukraine's proposal of a ceasefire isn't really new, the country has always been willing to agree on a ceasefire. - The German contract is lacking momentum, and a clear break through the figure is needed to make an attempt at the next support of 130.75.
- For the US 10yr Yield, it has edged near 4.30%, but not really a Technical level.
- The initial area of interest is seen much further out, up to 4.4341%, this would equate to 110.07+ Today.
BONDS: Gilt/Bunds Stuck Around 200bp
The 10-Year gilt/Bund spread is unable to trade meaningfully lower after breaking below 200bp, with the early narrowing impetus fading after the spread based at ~198bp (last ~1bp tighter at ~200bp).
- Gilt bulls are trying to force the first close below 200bp since April 8.
- Looser German fiscal policy is weighed against the constrained UK public finance position, with the readthrough for broader global trade another factor that is impacting the spread.
- A more activist approach from the DMO re: the gilt remit has helped limit spread widening episodes in recent weeks, with the agency tilting issuance away from the long end.
- Initial support in the spread is located at the April 8 closing level (197.4bp), with the next major support below there at the April 3 close (184.3bp).
- Respect of the 4.460% yield level in 10-Year gilts has helped prevent further tightening in the spread.
