UKRAINE: Trump Confirms PoW Exchange, Raises Prospect Of "Something Big"
US President Donald Trump posts on Truth Social, "A major prisoners swap was just completed between Russia and Ukraine. It will go into effect shortly. Congratulations to both sides on this negotiation. This could lead to something big???" The swap, said to involve 1,000 prisoners from each side was conducted after Ukraine sent its list of names of PoWs for release to Russia on 22 May. Moscow sent its list to Kyiv a day earlier. The swap was agreed to as part of the face-to-face talks involving Russian and Ukrainian delegations in Istanbul, Turkey last week.
- While Trump leaves the prospect of further moves towards a peace deal dangling in his post, the likelihood of any agreement in the short term appears slim. Indeed, on 22 May, the Kremlin reiterated that there are not even concrete plans for more direct talks, let alone a ceasefire agreement.
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GERMANY: Policy Transmission Not Strengthened By Higher Debt Expenses - BUBA
The Bundesbank's April monthly report concludes that higher private sector debt expenses following interest hikes in the post-Covid inflation cycle have not strengthened ECB monetary policy transmission. Key excerpts below:
- "Significant interest rate hikes led to increases in interest-dependent variables such as interest expenses and debt servicing in particular. Nevertheless, the debt situation of the non-financial private sector did not deteriorate fundamentally overall. Increased nominal income in particular had a relieving effect."
- "The current and expected development of the debt situation of the non-financial private sector does not indicate any comprehensive balance sheet restrictions. The results therefore suggest that the transmission of monetary policy has not been strengthened by debt and is unlikely to be strengthened in the near future."
OUTLOOK: Price Signal Summary - EUROSTOXX 50 Futures Correction Extends
- In the equity space, a reversal higher in S&P E-Minis on Apr 9 highlighted the start of a correction. The trend condition has been oversold following recent weakness and gains have allowed this to unwind. The contract remains below important resistance points and the trend condition is bearish. A resumption of weakness would refocus attention on 4832.00, the Apr 7 low and bear trigger. Initial resistance to watch is 5425.57 (pierced), the 20-day EMA, ahead of 5528.75, the Apr 10 high and a bull trigger.
- EUROSTOXX 50 futures have recovered from Tuesday’s low. Recent gains highlight a corrective cycle and the rally marks an unwinding of a recent oversold trend condition. Resistance at the 20-day EMA, at 4971.53, has been breached. The next level to watch is 5105.00, the 50-day EMA. The trend structure remains bearish. Key support and the bear trigger has been defined at 4444.00, the Apr 7 low. First support is at 4812.00, the Apr 16 low.
EGBS: Bund Futures Off Lows, But Buoyant Euro Equities Still Weighing
The recovery in risk appetite following yesterday’s constructive comments from Bessent and Trump leaves Bund futures -31 ticks versus yesterday’s settlement levels at 131.64. The weaker-than-expected Eurozone April flash services PMIs (led by Germany and France) may have aided the recovery from session lows of 131.44.
- Initial resistance and the bull trigger remains at 132.03, the April 7 high. Meanwhile, the April 17 low at 130.87 provides support.
- The Eurozone-wide services PMI was 49.7 (vs 50.5 cons, 51.0 prior). While the miss was expected given the weaker-than-expected French and German data earlier this morning, the smaller deviation from consensus (compared to FR/GE) suggests the EZ ex-France and Germany was a little better than expected.
- The German curve has bear flattened, with Schatz yields up 6bps.
- Today’s E4bln 2.50% Feb-35 Bund auction saw very soft results, but the market impact was limited.
- Spreads have been set for today’s triple tranche Austrian syndicated tap.
- 10-year EGB spreads to Bunds are tighter owing to the risk backdrop. The BTP/Bund spread is down 3bps to ~113.5bps.
- Portugal will ask the EU to use a fiscal rule escape clause to allow for increased defence spending.
- Eurex will launch a joint EU bond future on September 10 2025.
- The remainder of today’s regional calendar includes ECB-speak from Knot, Villeroy, Lane and Cipollone.
