US 10YR FUTURE TECHS: (U6) Monitoring Support

On June 2, voters in California, Iowa, Montana, New Jersey, New Mexico, and South Dakota will vote in statewide primary elections ahead of November’s midterms. Market focus will be on the Democratic Senate primary in Iowa - one of the 10 competitive Senate races this cycle. While all 10 Congressional seats are currently held by Republicans, the vacant seat of retiring Senator Joni Ernst (R-IA) is more vulnerable than previous cycles. Democrats believe a win in Iowa is a pathway to flipping the Senate by providing a cushion for challenging races in Alaska, Texas, and Ohio. 

• The Democratic primary pits Iowa state Rep. Josh Turek against state Sen. Zach Wahls, reflecting a broader struggle between a resurgent progressive movement and Minority Leader Chuck Schumer’s (D-NY) plan to back ‘electable’ moderates. In this race, the party establishment is behind Turek, so a Wahls win is likely to be received as positive for the GOP.
• Prediction markets give the Republican candidate a 60% chance of winning, which is likely within range for Democrats if inflation pressures continue to squeeze voters in the coming months. Sabato's Crystal Ball shifted the race from 'Safe R' to 'Likely R' when Ernst announced her retirement.
• NPR reports, “Iowa Democrats see an opening, especially as one of the states where recent special elections have seen notable shifts towards Democrats even as voters have soured on the national party's brand.”
• Note: Two separate special elections will take place in California's 1st District: One to fill the deep red district (R+25) of Representative Doug LaMalfa, who died in January. And another general election primary within the state's new redistricted map. This is one of the seats expected to flip to Democrats after Governor Gavin Newsom's (D-CA) referendum to force through a new map. 

• US Data/Speaker Calendar (prior, estimate). All times ET
• 06/02 0150 MN Fed Kashkari panel discussion
• 06/02 0830 Cleveland Fed Hammack on policy
• 06/02 1000 JOLTS Job Openings (6.866M, 6.865M), Openings Rate (4.1%, --)
• 06/02 1000 JOLTS Quits Level (3.171M, 3.125M), Quits Rate (2.0%, --)
• 06/02 1000 JOLTS Layoffs Level (1.867M, --), Layoffs Rate (1.20%, --)
• 06/02 1130 US Tsy $75B 6W bill auction
• Source: Bloomberg Finance L.P. / MNI

With the long run-up to the April 2027 presidential election already underway, opinion polling shows that the market-negative scenario of a second-round run-off between far-right Rassemblement National (RN, 'National Rally') president Jordan Bardella and far-left La France Insoumise (LFI, 'France Unbowed') leader Jean-Luc Mélenchon is an increasingly feasible outcome. It has been widely viewed that the most likely outcome of the first round will be an RN candidate against a moderate, either from the centrist Ensemble alliance, the conservative Les Républicains, or centre-left Socialists or Place Publique. However, instability and infighting in these groups have seen support fracture, with one poll from Harris Interactive showing Melenchon making the second round in a specific scenario.

• Important to the identity of Bardella's potential challenger is the identity of the candidate the centrist pro-Macron Ensemble alliance selects as its candidate. Two former prime ministers, Edouard Philippe from the centre-right Horizons and Gabriel Attal from the centrist Renaissance, have announced their intention to seek the presidency. Opinion polling has generally shown Philippe having a better chance of making the second round compared to Attal, but as can be seen from Chart 1, the close race for second has a number of potential challengers within the margin of error. 

Chart 1. First Round Presidential Election Opinion Polling, % with Gabriel Attal (Ren) and Edouard Philippe (Hor) as Ensemble Candidates

• Without some form of pre-election agreement among moderates, the risk of a far-right/far-left run-off will continue to weigh on political and market sentiment as the election approaches.
• The broad field of candidates and lack of certainty as to who will make the run-off (apart from an RN candidate) means there is little confidence among observers as to who might take the presidency. Predictions market site Polymarket shows political bettors assigning a 23% implied probability Bardella wins the presidency, compared to 18% for Philippe and 13% for Melenchon. 

Chart 2. Predictions Market Implied Probability of Winning French Presidency, %