Goldman Sachs Says China Competition Weighs More on EU Growth Than Trade Deficit 
BOJ Hawk Signals Faster Interest Rate Hikes Amid Inflation Risks 
Denmark Central Bank Intervenes to Support Krone Peg Against Euro 
Morgan Stanley Names BAE Systems Top European Defence Stock Despite Lower Price Target 
BoE Policymaker Alan Taylor Signals No Need for Interest Rate Hike Amid Iran War Inflation Risks 
ECB Set to Raise Interest Rates as Energy Shock Fuels Eurozone Inflation Concerns 
Supreme Court Backs Lisa Cook, Defends Federal Reserve Independence Against Trump Firing Attempt 
Buy the Dip: Gold Holds Strong at $3980, Targets $4150 
China Sets 1.25% Overnight Reverse Repo Rate Below Market Expectations 
ECB Keeps July Rate Options Open Amid Iran War Energy Price Risks 
New Zealand Unemployment and Inflation Debate Intensifies Ahead of 2026 Election 
The U.S. Federal Reserve is most likely to maintain status quo at its monetary policy meeting today as it pauses to parse more economic data but may hint it is on track for an increase in June.
The central bank is scheduled to release its policy decision at 2 p.m. Wednesday at the conclusion of its two-day meeting. Fed Chair Janet Yellen is not due to hold a press conference.
Amid this data event, we expect T-Bill net supply to turn back negative going forward, which should push GC repo lower and front-end cross-currency basis less negative.
Front-end spreads are too narrow versus their drivers at current levels; buy 3-year matched maturity swap spreads.
The bid for short-dated vol was exacerbated by dealer positioning, but at this point looks to have mostly run its course; the French election is a key risk factor.
Callable supply remains light, and despite the rally, the dVega/dRate curve is still highly asymmetric to short deliveries in a rally; stay long the bottom right.
Swap spreads: Over the past two weeks, price actions were dominated by the corporate calendar.
Since earnings season kicked off last Friday with announcements from several large domestic banks, we have seen approximately $30bn in fixed-rate USD-denominated gross supply 19 hit the market, including $22bn from financials.
Given the rapid decline in yields, a light near-term economic calendar, and heightened geopolitical uncertainty, we unwound our duration shorts and 2s/5s curve steepeners. The rally in rates was exacerbated by convexity and short covering flows. Issuance-related pressure on spreads should abate going forward. Initiate 3-year swap spread wideners. Stay long vega.
Stay in 6Mx5Y OTM USD payers versus ATMF EUR payers
Stay in $100mn notional 6Mx5Y OTM USD payer swaption (notification date 10/4/17, maturity date 10/4/22, ATMF 2.193%, strike 2.365%, premium 61.5bp) versus €93.5mn notional of 6Mx5Y ATMF EUR payer swaption (notification date 10/4/17, maturity date 10/4/22, ATMF strike 0.298%, premium 61.5bp; US Fixed Income Markets Weekly, 3/31/17). P/L since inception: -4.1 bp.
