Bond market in spotlight but volumes look to fade off into extended weekend for US and UK

EU Mid-Market Update: Bond market in spotlight but volumes look to fade off into extended weekend for US and UK; US and Iran holding nuclear talks in Rome; Nvidia to close Q1 earnings season next week.

Notes/observations

- Gilts yields decline marginally after better than expected UK retail sales, following a drop in US treasuries after PMI beat yesterday . Sterling is little fazed after data.

- Oil is heading for weekly decline, pressured by fears of another large OPEC+ output hike, while gold looks to notch a green week as safe haven flows have pivoted away from US dollar. The move from the dollar also helping Bitcoin, which is gaining steam as an alternative hedge, given concerns about US govt debt and expected supportive regulation for crypto from US admin. Bitcoin just a hair below ATH.

- FT reports that USTR Greer will tell EU Commissioner Šefcovic that Brussels’ recent explanatory note falls short, while Trump warns that extra duties will follow unless the EU agrees to deeper tariff cuts. On May 21, the EU tabled a new proposal for phased reductions on non-sensitive agricultural and industrial goods—coupled with cooperation on energy, AI, and digital infrastructure and strengthened commitments on labor, environmental, and economic-security standards—to address U.S. concerns.

- Japan PM Ishiba after phone call said he is looking forward to meet with Trump at G7 Summit in Canada in few weeks.

- Regarding rise in JP yields, Soc Gen strategist notes ‘steady auction supply and accelerating quantitative tightening (QT) has increased bond supply as domestic investor demand has waned, and global term premiums have risen’. They expect JGB vulnerability persists until BoJ changes bond buys, MoF shifts issuance, or demand grows.

- Asia closed mixed with Shanghai underperforming -0.9%. EU indices +0.2% to -0.3%. US futures +0.1%. Gold +1.0%, DXY -0.5%; Commodity: Brent -0.4%, WTI -0.4%; Crypto: BTC +0.1%, ETH +0.2%.

Asia

- South Korea Fin Ministry: To closely monitor US and Japan Treasury bond markets - statement from F4 meeting from Acting Fin Min Kim.

- China brokerages said to have cut rates on client margin deposits - China Securities Times; China reportedly lowers deposit rate ceiling to protect bank's interest margins.

- China PBOC MLF injections show 'pro-growth' policy stance; PBOC to auction CNY500B in MLF funds on Fri v CNY125.0B in maturing funds - Shanghai Securities News.

- Japan Apr National CPI CPI Y/Y: 3.6% v 3.5%e; CPI (ex-fresh food) Y/Y: 3.5% v 3.4%e (Core highest in more than 2 years); CPI (ex-fresh food/energy) Y/Y: 3.0% v 3.0%e.

- Japan govt said to again consider measures to cut utility bills.

- US small-reactor push is getting interest from South Korea and Japan – Nikkei.

- South Korea main opposition party (Democratic Party) DP's Lee support falls to 45% ahead of Jun 3rd election (v 51% prior); PPP's Kim at 36% - Gallup poll.

Taiwan

- Taiwan Pres Lai Ching-te: To prevent chip dumping from any country at low prices, which could hinder innovation and disrupt development.

Mid-East

- Iran-US nuclear talks set to begin at 13:00 local time (07:00 ET) in Rome.

Europe

- UK Apr Retail Sales (ex-auto/fuel) M/M: 1.3% v 0.1%e; Y/Y: 5.3% v 4.4%e.

- Germany Q1 Final GDP Q/Q: 0.4% v 0.2% prelim ; Y/Y: 0.0% v -0.2% prelim; GDP NSA Y/Y: -0.2% v -0.4% prelim.

- EU confirms to soon delay bank trading rules by 1 year.

- German Chancellor Merz said to back Nordstream ban - FT.

- EU to postpone carbon fiber restrictions for autos.

- ECB Chief Lagarde: International trade will never be the same again - TV interview.

- ECB's Rehn (Finland): June rate cut is appropriate if backed by data.

- ECB's Stournaras (Greece): See June rate cut and then a pause.

- Turkey government said to detain >40 people as part of New Istanbul Municipality operation.

- Poland presidential candidates Trzaskowski [Warsaw Mayor] and Nawrocki [opposition candidate] tied at 47% in poll.

Americas

- President Trump to sign executive orders on Fri at 1 pm ET.

- Large US banks said to be 'exploring' a Stablecoin consortium - WSJ.

- US Pres Trump: Will keep US 'dominating' in crypto and Bitcoin - Truth.

- White House official Hassett: Will lead tax bill talks with Bessent; Nothing has been decided today on Fannie Mae and Freddie Mac, Disagrees with Jamie Dimon's view on stagflation.

- US Supreme Court supports Pres Trump's removal of NLRB and MSPB agency heads; Ruling doesn't apply to Fed, which is termed a 'uniquely structured entity'.

Trade

- US said to be ‘unhappy’ with the progress of the EU trade talks; Pres Trump pushes EU to cut tariffs or face extra duties - FT.

- TSMC said to have urged the US for an exemption for chip-related tariffs.

- South Korea might hold the 3rd round of 'working-level' US trade talks following the Jun 3rd elections in South Korea - Yonhap.

- Japan PM Ishiba: Confirms to have held phone call with US Pres Trump for about 45 min.

- Japan Economic Revitalization Min and Top Trade Negotiator Akazawa said to revisit US for trade talks from May 30th.

- Japan's Trade Minister, officials from South Korea and Taiwan said to have been invited to Alaska LNG pipeline project meeting on June 2nd, no major deals expected.

Energy

- Reportedly US Pres Trump to sign nuclear related order Friday; Will invoke wartime act over US uranium dependence.

- (UK) Energy Regulator Ofgem cuts Energy Price Cap by 7% from £1,849 to £1,720, effective from July 1st for 3 months.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.10% at 550.84, FTSE +0.25% at 8,760.91, DAX +0.35% at 24,084.56, CAC-40 -0.22% at 7,847.19, IBEX-35 +0.17% at 14,288.86, FTSE MIB -0.14% at 40,199.00, SMI +0.16% at 12,281.90, S&P 500 Futures +0.09%].

Market focal points/key themes: European indices opened modestly higher across the board and advanced through the early part of the session; risk appetite seen supported by hope of further progress on trade deals; among sectors leading to the upside are real estate and technology; lagging sectors include financials and telecom; health care sector supported after Bayer announced CHMP approvals; reportedly Salzgitter looking to sell its KHS unit; reportedly Hensoldt looking to offload its South Africa optronics unit; earnings expected in the upcoming Americas session include Booz Allen Hamilton.

Equities

- Consumer discretionary: Carrefour [CA.FR] -0.5% (reportedly Ahold Delhaize held taks to acquire Carrefour in end-2024, but decided against in Jan 2025), LVMH [MC.FR] -0.5% (US said to be ‘unhappy’ with the progress of the EU trade talks; Pres Trump pushes EU to cut tariffs or face extra duties), Begbies Traynor [BEG.UK] +5.0% (trading update), Games Workshop [KAW.UK] -3.5% (trading update).

- Financials: AJ Bell [AJB.UK] +7.5% (trading update), Uniqa Insurance Group [UQA.AT] -1.0% (Q1 results) - Healthcare: Bayer [BAYN.DE] +3.0% (U.S. FDA grants Priority Review for new indication of finerenone for patients with common form of heart failure).

Speakers

-China Vice Premier He Lifeng: Domestic economy continues to show an upward trend.

-ECB's Rehn (Finland): June rate cut is appropriate if backed by data.

-ECB's Stournaras (Greece): See June rate cut and then a pause.

-India Central Bank (RBI) Gov Malhotra: To continue to provide liquidity for transmission.

-Philippines Central Bank (BSP) Gov Remolona: Expects resignation of economic team will Not be accepted - financial press.

-Japan Economic Revitalization Min and Top Trade Negotiator Akazawa: Japan has its own interests to protect - comments at Haneda airport.

-ECB Chief Lagarde: International trade will never be the same again - TV interview.

-BOJ Gov Ueda: Declined to comment on short-term moves in market; Big uncertainties remain over tariff impact, will closely watch market developments.

Economic data

-(EU) ECB Euro-Area Q1 Negotiated Wages: 2.4% v 4.1% q/q.

-(TW) Taiwan Apr M2 Money Supply Y/Y: 3.9% v 4.4% prior; M1 Money Supply Y/Y: 1.9% v 1.8% prior.

-(TW) Taiwan Apr Industrial Production Y/Y: 22.3% v 13.9%e.

-(TH) Thailand Apr Foreign Reserves w/e May 16th: $254.7B v $256.4B prior.

-(FR) FRANCE MAY CONSUMER CONFIDENCE: 88 V 93E.

-(HU) Hungary Apr Unemployment Rate: 4.4% v 4.3%e.

-(SE) Sweden Apr Unemployment Rate: 8.9% v 8.5% prior; Unemployment Rate (seasonally adj): 8.5% v 8.7%e; Trend Unemployment Rate: 8.6% v 8.8% prior.

-(DE) Germany Q1 final GDP Q/Q: 0.4% V 0.2% prelim; Y/Y: 0.0% V -0.2% prelim; GDP NSA Y/Y: -0.2% v -0.4% prelim.

-(UK) APR Retail Sales (EX-AUTO/FUEL) M/M: 1.3% V 0.1%E; Y/Y: 5.3% V 4.4%E; Retail Sales (including auto/fuel) M/M: 1.2% v 0.3%e; Y/Y: 5.0% v 4.5%e.

-(JP) Japan Apr Nationwide Dept Sales Y/Y: -4.5% v -2.8% prior; Tokyo Dept Store Sales Y/Y: -6.3% v -4.2% prior.

-(SG) Singapore Apr CPI M/M: -0.3% v -0.4%e; Y/Y: 0.9% v 0.8%e; CPI Core Y/Y: 0.7% v 0.5%e.

-(IE) Ireland May Consumer Confidence Index: 60.8 v 58.7 prior.

-(UK) May GfK Consumer Confidence: -20 v -22e.

Fixed income issuance

-(FR) France Debt Agency (AFT) announces upcoming issuance; To sell €5.9-7.1B in 3-month, 6-month and 12-month bills on Mon, May 26th (3 tranches).

-(UK) DMO to sell £1.25B in 0.125% 2031 index-linked gilt on Thurs, May 29th.

-(JP) Japan sells ¥4.5T vs. ¥4.5T indicated in 3-Month Bills; Avg Yield: 0.3818% v 0.3677% prior; bid-to-cover: 3.31x v 3.17x prior.

- (NZ) New Zealand sells total NZ$450M vs. NZ$450M indicated in 2029, 2033 and 2041 bonds.

-(AU) Australia sells A$800M vs. A$800M indicated in 2.75% Nov 2028 bonds; Avg Yield: 3.4859% v 3.2952% prior; bid-to-cover: 4.99x v 4.55x prior.

-(KR) South Korea sells KRW1.8T vs. KRW1.8T indicated in 1-year Bonds.

Looking ahead

- 05:30 (IN) India to sell combined INR270B in 2029 and 2054 bonds.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2043 and 2058 Bonds.

- 06:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills (£1.5B, £2.0B and £3.0B respectively).

- 06:30 (IS) Iceland to sell 2-27 and 2042 RIKB Bonds.

- 07:30 (IN) India Forex Reserve w/e May 16th: No est v $690.6B prior.

- 08:00 (PL) Poland Apr M3 Money Supply M/M: No est v 0.8% prior; Y/Y: No est v 10.3% prior.

- 08:00 (MX) Mexico Apr Trade Balance: $0.1Be v $3.4B prior; Exports: No est v $55.5B prior; Imports: No est v $52.1B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance.

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:30 (CA) Canada Mar Retail Sales M/M: +0.7%e v -0.4% prior; Retail Sales (Ex Auto) M/M: -0.1%e v +0.5% prior.

- 09:00 (CL) Chile Apr PPI M/M: No est v 0.4% prior.

- 10:00 (US) Apr New Home Sales: 695Ke v 724K prior.

- 11:00 (US) May Kansas City Fed Services Activity: No est v 3 prior.

- 11:00 (MX) Mexico Q1 Current Account Balance: -$1.6Be v $12.6B prior.

- 11:00 (EU) Potential sovereign ratings after European close (S&P on France; Moody's on Norway).

- 13:00 (US) Weekly Baker Hughes Rig Count data.