UK FISCAL: Spending Review: Credibility concerns on health, defence, admin (2/3)

ERZ5 98.37/98.50cs, bought for 2.5 in 17.5k (ref 98.18, 8% del).

• Treasuries broadly consolidate yesterday’s sell-off on US-China trade de-escalation ahead of today’s US CPI report for April.
• MNI US CPI Preview here.
• Cash yields are 0-2.5bp lower on the day, with declines led by 2s/3s and with 20s lagging the move.
• 2s10s at 46.7bp and 5s30s at 81bp sit within some wide recent ranges.
• TYM5 trades at 110-06 (+01), maintaining the softer tone on modest cumulative volumes of 290k.
• Yesterday’s low of 110-01+ met latest support at a 76.4% retracement of the Apr 11 – May 1 bull leg, after which lies a key 109-08 (Apr 24 low). To the upside, resistance at 111-04+ (20-day EMA).
• Some recent downside flow: TYN5 109.00/108.00 put spread 20K lots blocked at 0-14 (05:32:08ET) following 21K of the FVN5 107.00/106.25 put spread being blocked through the London morning.
• Data: US CPI Apr (0830ET), Real avg earnings Apr (0830ET)
• Fedspeak: None scheduled
• Bill issuance: US Tsy $48B 52W & $70B 6W bill auctions (1130ET)

• On the commodity front, the latest pullback in Gold appears corrective. Key short-term support to watch is $3202.0, the May 1 low. A clear break of this level would undermine the short-term bullish theme and signal scope for a deeper retracement. This would open $3164.3, 61.8% of the Apr 7 - Apr 22 upleg. Note that the 50-day EMA is at $3161.0. The medium-term trend condition remains bullish, a reversal would refocus attention on $3500.1, the Apr 22 high and bull trigger.
• In the oil space, a downtrend in WTI futures remains intact and short-term gains are considered corrective. For now, the corrective cycle remains in play and price has traded through the 20-day EMA. Key resistance to watch is $63.55, the 50-day EMA, a clear break of this level would highlight a stronger reversal. This would open $66.41, the Apr 4 high. For bears a reversal lower would refocus attention on $54.67, the Apr 9 low and bear trigger.