US DATA: Solid Richmond Fed Non-Mfg Sees Better Activity, Softer Inflation (2/2)

“IRAN'S FOREIGN MINISTER SAYS TRUMP IS REQUESTING NEGOTIATIONS BECAUSE THE U.S. HAS NOT ACHIEVED ANY OF ITS OBJECTIVES AND WE ARE LOOKING INTO THAT REQUEST - MINISTER'S ACCOUNT TELEGRAM” - Reuters

Tsy futures are holding mildly weaker - inside session range ahead of the early $69B 2Y note auction (91282CQL8) at 1130ET, WI currently at 3.795% -- 14.1bp rich to last month's tail:

• March recap: Tsy futures retreated after the $69B 2Y note auction (91282CQH7) tailed: high yield of 3.936% vs. 3.917% WI; 2.44x bid-to-cover vs. 2.63x prior.
• Peripheral stats: Indirect take-up rose to 59.38% from 55.91% prior, directs sharp retreated to 16.5% vs. 34.28% prior, primary dealer take-up jumped to 24.12% vs. 9.81% prior.

The Joint Committee on the National Security Strategy (including both MPs and members of the House of Lords) hears evidence from former NATO Secretary General and Labour Defence Secretary Lord (George) Robertson of Port Ellen at 16:30BST (10:30ET, 16:30CET). Lord Robertson delivered a high-profile speech earlier in March in which he criticised the British government’s “corrosive complacency” when it comes to national security (see: UK: Fmr. NATO Sec-Gen: Gov't Guilty Of 'Corrosive Complacency' On Security), raising pressure on PM Sir Keir Starmer and Chancellor of the Exchequer Rachel Reeves to boost defence spending amid strained budgets.

• Reuters reported in mid-April comments from Reeves stating, "Obviously we are working through a range ⁠of options, but my two budgets have both increased taxes substantially and I would prefer not to have to do that ​again." In terms of borrowing, British government spending on debt interest costs is already too high, she said. [...] with the public finances already under strain, [Starmer's] government has not yet published a 10-year defence investment plan. If it ruled out raising taxes or borrowing more, the government would probably have to look at cutting other areas of ​public spending - possibly the big welfare budget - to fund a bigger defence budget."
• However, based on the gov'ts previous inability to get any notable cuts to welfare spending through parliament, despite a huge majority in the House of Commons, the prospect of spending reductions paying for increased military spending is slim-to-none.