FOREX: USD Index Consolidates Corrective Move Higher

European yields fell modestly Monday, with bellies outperforming on core curves.

• Bunds and Gilts were solid early, the former continuing a partial recovery from the post-ECB lows.
• The rally lost steam though. There was a modicum of risk appetite on reports suggesting the US and China could reach an agreement on key issues central to their trade dispute (including on export restrictions/rare earths), while higher oil prices weighed in early afternoon trade.
• Core FI would get a bit of a lift from a notable downtick in US consumer inflation expectations (NY Fed), helping cement modest gains.
• The German and UK curves leaned slightly steeper overall, with 5Ys slightly outperforming.
• Periphery/semi-core EGB spreads were little changed, with BTPs slightly outperforming.
• Tuesday's highlight is the UK labour market report - MNI's preview is here. The most important number remains the private AWE ex-bonus, which consensus expects to fall to 5.3% in the 3-months to April from 5.56%Y/Y in the 3-months to March. The UK spending review comes Weds.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.6bps at 1.864%, 5-Yr is down 1.9bps at 2.156%, 10-Yr is down 0.9bps at 2.567%, and 30-Yr is up 0.3bps at 3.012%.
• UK: The 2-Yr yield is down 1bps at 4.003%, 5-Yr is down 1.7bps at 4.138%, 10-Yr is down 1.2bps at 4.632%, and 30-Yr is down 1.1bps at 5.328%.
• Italian BTP spread down 0.6bps at 92bps / French OAT unchanged at 67.2bps 

MEF has announced it will be looking to sell the following at its auction Thursday, June 12:

• E2.0-2.5bln of the 2.65% Jun-28 BTP (ISIN: IT0005641029)
• E2.75-3.0bln of the 3.25% Jul-32 BTP (ISIN: IT0005647265)
• E1.0-1.25bln of the 1.25% Oct-54 BTP (ISIN: IT0005611741)

The on-the-run 3Y and 7Y offerings are as we expected. We didn't have a strong conviction around which 15+ year BTP was going to be on offer alongside them. 

• Stocks are mixed at midday Monday morning trade, inside narrow ranges with the SPX eminis and Nasdaq outperforming a mildly weaker Dow index. Relatively muted trade as markets await Wednesday's CPI release.
• Currently, the DJIA trades down 44.63 points (-0.1%) at 42718.52, S&P E-Minis up 6 points (0.1%) at 6012.75, Nasdaq up 61.4 points (0.3%) at 19591.89.
• Materials, materials, energy and tech-related stocks led gainers in the first half: Albemarle +4.50%, Enphase Energy +4.03%, Evergy +3.43%, Qualcomm gained +3.55% while Intel Corp climbed 3.46%.
• Meanwhile, health care and insurers underperformed in the first half, weaker after Goldman Sachs healthcare conference where industry leaders reported average hospital stays remain longer than pre-Covid levels.
• Laggers included Allstate Corp -4.23%, Aon -4.23%, American International Group -4.18%, Progressive -4.16%, PG&E Corp -4.16% and Arthur J Gallagher -3.24%.