Global Rates
ECB deposit
2.00%
Unchanged
BOE base rate
3.75%
Unchanged
BoJ policy rate
0.75%
Unchanged
WTI Oil
~$92
-$5 on deal news
USD/JPY
~151
Easing
US Markets
CLOSED
Memorial Day
Memorial Day — US markets closed. Global rate markets are in a holding pattern, processing the partial Iran deal signal without a confirmed announcement. The BoJ June hike has drifted from 60% to 57% — a modest continuation of the -22pp weekend repricing, as traders incrementally price in the deal without yet committing to full disinflation pricing. ECB June similarly drifted from 77% to 74%. The key event this week for global rates is the Eurozone May HICP flash on Friday May 30 — this print arrives 6 days before the June 5 ECB meeting and will be the single most important data point before the decision. With WTI now at $92 and falling, the energy contribution to May HICP will be sharply negative versus April. Our ECB June NO thesis strengthens daily as the HICP print approaches. The BoJ situation is more binary: the Iran deal, when confirmed, removes Japan's imported inflation argument entirely — but until signed, the market will not fully reprice. We expect the BoJ market to break below 50% upon official confirmation.
Today's Market Moves
BoJ: +25bp June
60%→57%-3pp
Continued drift: deal partially priced, WTI $92 — imported inflation case weakening
ECB: +25bp June
77%→74%-3pp
HICP flash May 30 approaching: energy contribution increasingly negative
BOE: hike 2026
70%→70%0pp
Stable: UK inflation thesis independent of oil — services CPI >5% unchanged
ECB: +25bp July
32%→30%-2pp
June pause more likely → July probability declining in tandem
BOE: +25bp June
3%→3%0pp
Stable long shot
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | BoJ: +25bp June | Jun 2026 | 57% | 35% | -22pp | SELL YES | $133K | 8/10 |
| 2 | ECB: +25bp June | Jun 2026 | 74% | 50% | -24pp | SELL YES | $347K | 8/10 |
| 3 | ECB: +25bp July | Jul 2026 | 30% | 14% | -16pp | SELL YES | $N/A | 5/10 |
| 4 | BOE: hike 2026 | Dec 2026 | 70% | 80% | +10pp | BUY YES | $31K | 6/10 |
| 5 | BOE: +25bp June | Jun 2026 | 3% | 12% | +9pp | BUY YES | $226K | 5/10 |
| 6 | BOE: hold July | Jul 2026 | 76% | 64% | -12pp | SELL YES | $N/A | 4/10 |
| 7 | CBR: cut June | Jun 2026 | 85% | 77% | -8pp | NEUTRAL | $53K | 4/10 |
| 8 | RBA: hike June | Jun 2026 | 10% | 7% | -3pp | NEUTRAL | $29K | 3/10 |
Top 5 Opportunities
1
BoJ: +25bp June — NO
↓ SELL YES-22pp
Market price
57%
Fair value
35%
Gap: -22pp
Three days of continuous repricing: 82% (Wednesday) → 60% (Sunday) → 57% (Monday). The market has repriced -25pp since Friday, yet at 57% it is still 22pp above our fair value of 35%. The logic is intact: Japan imports 90% of its energy, and WTI at $92 (with $80-85 expected upon deal confirmation) eliminates the imported inflation pillar that BoJ hawks have used to argue for tightening. The 6-3 April vote majority has no reason to reverse course. Japan's GDP at 0.5% and exposure to US auto tariffs add weight to the hold case. Once the deal is confirmed and WTI breaks below $88, we expect this market to drop below 50% — the natural psychological threshold. That move, when it comes, will represent the final 7pp of our edge crystallizing.
▵ Bull case
- 3 hawkish dissenters: still pushing for June hike
- Spring Shunto +5%: domestic wage argument persists
- Japan core CPI 2.8% still above 2% target
- Deal unsigned: risk premium partially intact
▿ Bear case
- WTI $92 → $80-85 on deal: Japan imported inflation thesis collapses
- 6-3 vote: majority for status quo
- Japan GDP 0.5%: no growth justification for tightening
- USD/JPY ~151: yen defense pressure easing
- Memorial Day: no adverse data today
2
ECB: +25bp June — NO
↓ SELL YES-24pp
Market price
74%
Fair value
50%
Gap: -24pp
The gap has widened slightly as our fair value improved: 74% vs 50% = 24pp. The HICP flash on Friday May 30 is the decisive data point. With WTI having averaged ~$98-100 in May but with the last week of May now pricing in $88-92 (deal expectations), the energy component of May HICP will be materially lower than April. Our estimate for May HICP flash: 2.4-2.7%. If it prints in this range, the ECB has zero institutional grounds to hike at the June 5 meeting — they held in April at 3.0% already. The market at 74% implies traders are still betting the ECB prioritizes its hiking cycle over incoming disinflation data. We believe the data will force their hand.
▵ Bull case
- HICP still above 2% even at 2.7%
- German fiscal stimulus sustains demand
- Bloomberg: two ECB hikes still in consensus forecast
- Services inflation structural in eurozone
▿ Bear case
- WTI $92: energy component sharply negative for May HICP
- HICP flash May 30: 2.4-2.7% expected — 6 days before meeting
- ECB held in April at 3.0%: strong precedent for pause
- Deal removes geopolitical risk premium from EUR inflation expectations
3
BOE: hike 2026 — YES
↑ BUY YES+10pp
Market price
70%
Fair value
80%
Gap: +10pp
Unchanged thesis. The BOE is the counter-trade in our global rates book. UK inflation is not oil-driven — services CPI above 5% is structural and immune to Hormuz repricing. OECD projects UK CPI at 4% for 2026, second highest in G7. As global energy prices fall, if UK CPI stays elevated, the culprit is entirely domestic — which paradoxically makes the BOE case for hiking stronger, not weaker. 70% for at least one hike by December remains underpriced against a services-driven inflation backdrop. The June 18 CPI publication (same day as BOE meeting) is the binary catalyst.
▵ Bull case
- UK services CPI >5%: not oil-driven, persistent
- OECD: 4% UK CPI for 2026
- MPC: 1 member already dissenting for a hike
- Iran deal clarifies domestic inflation source
▿ Bear case
- 8-1 vote: 8 comfortable holding
- Iran deal reduces UK headline CPI
- Fragile UK growth: BOE weighing recession risk
- Low liquidity $31K
4
ECB: +25bp July — NO
↓ SELL YES-16pp
Market price
30%
Fair value
14%
Gap: -16pp
Secondary position. Market has drifted from 32% to 30% as the June pause thesis gains credibility. If the ECB pauses in June (our primary thesis), July becomes near-certain hold: the ECB has never hiked consecutively without a data-validation pause since 2022. With HICP potentially falling to 2.4-2.7% in May and continuing to decelerate in June-July (WTI at $85), the ECB's sequential hiking rationale dissolves. Bloomberg consensus confirms: the expected schedule is June + September (not July).
▵ Bull case
- Inflation rebounds if deal collapses
- ECB could front-load two consecutive hikes if HICP surprises high
▿ Bear case
- ECB never hikes consecutively without pause
- HICP trajectory declining through summer
- Bloomberg: June + September (not July)
- June outcome alone makes July moot
5
BOE: +25bp June — YES
↑ BUY YES+9pp
Market price
3%
Fair value
12%
Gap: +9pp
Lottery ticket position unchanged. At 3¢ for YES, the asymmetry remains attractive: if UK CPI on June 18 surprises upward (above 4% despite lower global oil, driven by services), the BOE faces domestic urgency it cannot ignore. The Iran deal paradox is real here: falling oil globally with persistent UK services inflation would signal a purely domestic inflation problem — arguably strengthening the case for a surprise June hike. Low probability, high optionality.
▵ Bull case
- Iran deal paradox: persistent UK inflation despite lower oil = domestic urgency
- 2023 precedent: 50bp surprise hike
- CPI same day as meeting: data-dependent binary
▿ Bear case
- 8-1 vote: 4 additional dissenters needed in <4 weeks
- Deal reduces UK headline CPI
- BOE institutional conservatism