IRAN: Trump Has Been Presented With, and Is Considering, Range of Iran Options

UBS note that “despite the significant repricing in the front end of the EUR OIS curve following the Fed meeting and the recent US-China trade developments, EUR curves have only marginally flattened. This suggests that the steepening trend is not yet over and could provide protection against shifts in policy expectations”, particularly in light of the EUR 1y1y move since the FOMC decision.

• UBS acknowledge that “EUR steepeners have been a popular and consensus view”. Nevertheless, they think that “the favourable carry and roll-down characteristics will continue to encourage investors to buy for carry, particularly given the relatively compressed credit spreads”
• They believe that “expectations of rising defence and infrastructure spending should continue to support the steepening theme, while the risks posed by U.S. tariffs on Eurozone growth and inflation are likely to exert continued downward pressure on the front end, resulting in a steepening”.
• Finally, they note that “some Dutch pension funds are likely to delay their transition in the new system and the ability to delay until January 2028, which will be facilitated by an amendment now in parliament is seen as essential. But broadly the transition is expected to start in earnest in January 2026 and to be largely complete by 2027. As the transition programme progresses, support for the long end should turn to selling”.

• Reoffer: 99.746 / 2.790%
• Spread set earlier at MS+34bps (guidance was MS+36bps area)
• Size: E3bln WNG
• Books closed in excess of E9.5bln (inc E700mln JLM interest)
• HR 102% vs 1.70% Aug-32 Bund (spot ref 95.380
• Maturity: 27-Sep-2032
• Settlement: 26-May-2025 (T+5)
• Coupon: 2.750% Fixed, Annual ACT/ACT, short first to 27-Sep-2025
• Bookrunners: DB(B&D/DM)/DZ/GSBE SE
• ISIN: EU000A2SCAU4
• Timing: FTT Immediately (Priced TOE 12:31 LDN / 13:31 CET)

From market source

Upward pressure in long-end German yields has stalled over the past ~90 minutes, with EU-bond supply in the rear-view and brent crude prices softening to fresh session lows. 

• USTs meanwhile continue to weaken, with 10- and 30-year yields now up ~8bps on the session, the latter now at 5.03%.
• The 10-year UST/Bund spread has widened back to 191.5bps. The spread reached a session and multi-week high of 192.7bps earlier this morning.
• Fed’s Bostic has re-iterated that he only sees one rate cut this year (see above for a selection of headlines and commentary).