IRAN: US and Iran Edging Closer To Signing Agreement At G7 Meet

"The REPUBLIC OF LATVIA has mandated BNP PARIBAS and Credit Agricole CIB as Joint ESG Structurers for the update of its Sustainability Bond Framework. A Global Investor Call to present the updated framework will take place on Tuesday 19th May at 13 UKT / 14 CET, followed by a series of fixed income investor calls in the afternoon."

• We expect this is likely ahead of a syndication which may come in the last two weeks of May.

• ECB-dated OIS price 74bps of hikes through year-end, down 3bps from yesterday’s close but still up 8bp on the week. We still believe a “measured adjustment” response from the ECB is most plausible, with the bar to delivering more than 3x25bp hikes this year quite high given the potential growth ramifications. That said, it’s difficult to confidently pushback on outright hike pricing at current levels given the unpredictability of incoming Middle East headline flow. Front-end rates continue to exhibit a high correlation with oil prices.
• There’s been plenty of ECB speak this morning (Villeroy, Rehn, Radev, Dolenc), but nothing to pushback meaningfully on market pricing. Rehn, a more dovish leaning member of the GC, acknowledged that we have moved to a “less favourable scenario, at least for oil prices” .
• ECB President Lagarde and Chief Economist Lane are due to speak this evening. It will be interesting to see if the recent escalatory rhetoric from the US and Iran lead to a shift in stance. However, Lagarde’s comments on May 7 highlighted an intensely data-dependent approach to rate hikes. Given no tier 1 Eurozone data has been released since then, it’s hard to see how much this guidance can change.
• The next key piece of Eurozone data will be next week’s May flash PMIs, in particular for an update on input cost passthrough to output prices. 

A recovery from session lows in crude oil counters some of the overnight/early London recovery in core global FI markets.

• Note that the IEA pointed to a non-negligible global oil supply shortfall in ’26, while the U.S. & Iran are seemingly no closer to striking an accord, which has helped support oil prices through early London trade.
• TY, Bund and gilt futures failed to threaten a full retracement of yesterday’s losses before the bid stalled.
• Elsewhere, ongoing focus remains on the political situation within the UK, with PM Starmer’s future coming under increased scrutiny in the wake of the local election results.