- Italy sells EUR 9.00bln 6-month bills in an auction that drew decent demand, as such, focus now turns to tomorrow’s 5- and 10-year issuance from the Italian treasury.
- Spreads between peripheral 10-yr government bond yields and their German counterpart seen tighter on the day; Spanish PM Rajoy says he is to call for measures to ease borrowing costs at this week’s summit.
- Markets remain cautious, with volumes remaining light ahead of the two-day EU summit set to kick off tomorrow.
- China may cut the RRR in July as funds are expected to remain tight even after the CNY 95bln of reverse repos by the PBOC yesterday, according to unsourced reports. (Shanghai Securities News)
- The Chinese economy is expected to grow by more than 7.5% in the first half of this year, according to the ministry of industry and information technology. (Newswires) The ministry added that some economic indicators slowed faster in Q2 and economic downward pressure is increasing.
- BarCap preliminary US Treasury month-end extension seen +0.02yrs
EU & UK Headlines
- Italian PM Monti has set the stage for a tough fight with Germany at the EU summit this week, insisting he will continue to push Italy’s proposal to use Eurozone bailout funds in an attempt to stabilize financial markets. (FT)
- The Eurogroup are to hold a teleconference today in order to discuss a request for emergency lending from Cyprus and the details of a similar request from Spain, according to Eurozone officials. (Newswires)
- The leader of the opposition SPD has called for German Chancellor Merkel to back urgent crisis measures to reduce Eurozone sovereign borrowing costs, warning that without such action the EMU will explode. The opposition leader did back Merkel in opposing jointly-guaranteed Eurozone bonds or a redemption fund. (FT)
- ECB’s Weidmann has said crafty attempts to cheat past EU treaties by the quick introduction of Euroarea liability such as Eurobonds, deposit insurance or a joint debt fund would undermine confidence in the currency union. (Sueddeutsche Zeitung)
- Spain’s government may increase taxes to rein in the budget deficit, including scrapping a rebate for homeowners that PM Rajoy introduced six months ago to meet a campaign pledge. (Newswires)
- France is seeking to raise EUR 500mln with an oil product tax. The tax is to be based on the value of stocks of oil products and will affect both refiners and distributors, according to unidentified sources. (La Tribune)
- EU’s Barnier says a banking union is the first step to integration and that the UK must be a part of the supervision plan. (Newswires)
- Italy sells EUR 9.00bln 6-month BoTs with a bid/cover 1.615 (Prev. 1.61), yield 2.957% (Prev. 2.104%) – highest yield since December. (Newswires)
- BarCap preliminary Pan Euro Agg month-end extension seen +0.08yrs
US equities look to open flat despite the better than forecast US durable goods orders headline data for May, with the components missing expectations but showing an increase from the previous month. Looking ahead to the rest of the session, US Pending Home Sales for May are scheduled to be released at 1500BST, with an expected increase of 1.5% M/M and 9.9% Y/Y
- US Durables Goods Orders (May) M/M 1.1% vs. Exp. 0.5% (Prev. 0.2%, Rev. -0.2%)
- US Durables Ex. Transportation (May) M/M 0.4% vs. Exp. 0.7% (Prev. -0.6%, Rev. -0.6%)
- US Cap. Goods Orders Non-Def Ex. Air (May) M/M 1.6% vs. Exp. 1.9% (Prev. -1.9%, Rev. -1.4%)
- US Cap. Goods Ship Non-Def Ex. Air (May) M/M 0.4% vs. Prev. -1.4%, Rev. -1.5%)
- US Midwest Manufacturing (May) 93.4 (Prev. 94.2, Rev. 94.4)
- US MBA Mortgage Applications (Jun 22) W/W -7.1% vs Prev. -0.8%. (Newswires)