Global Rates
ECB deposit
2.00%
Unchanged
BOE base rate
3.75%
Unchanged
BoJ policy rate
0.75%
Unchanged
WTI Oil
$92.36
+$2 on deal stall
Apr HICP (EZ)
3.0% YoY
+0.4pp vs March
USD/JPY
~152
Yen slightly weaker
The Iran deal complications that unfolded over the long weekend are reshaping the global rates picture in two important ways. First, WTI bouncing to $92 from $90 reduces the energy disinflation argument for both the ECB and BoJ in the near term. Second, and more significantly, April HICP for the eurozone came in at 3.0% year-on-year — hot and above the ECB's 2% target — which is now forcing us to revise our ECB June NO thesis. With WTI averaging ~$100-105 in May (not the $88-92 we initially expected after the deal was 'largely negotiated' on May 22), the May HICP flash on Friday May 30 may not be as dramatically deflationary as we hoped. Bloomberg's latest survey shows economists now expect both a June and September ECB hike — with a June hike priced at 75% on Polymarket, our edge has narrowed from -24pp to approximately -18pp. We lower ECB confidence from 8 to 6. The BoJ picture has stabilized: at 59% for a June hike (up from 57%), the deal uncertainty partly restores the imported inflation argument, but 6-3 majority for hold and Japan's 0.5% GDP still anchor our NO thesis. The week's decisive data point remains the Eurozone HICP flash on May 30 — a print below 2.5% would reinvigorate our ECB NO thesis; a print at or above 3.0% would require us to exit.
Today's Market Moves
BoJ: +25bp June
57%→59%+2pp
WTI bounce + deal stall: imported inflation argument partially restored, USD/JPY ~152
ECB: +25bp June
74%→75%+1pp
April HICP 3.0% — hotter than expected; May avg WTI higher than modeled; edge narrows
BOE: hike 2026
70%→70%0pp
Unchanged — UK services CPI >5% remains independent of oil dynamics
ECB: +25bp July
30%→31%+1pp
April HICP 3.0% strengthens case for two hikes this year
BOE: +25bp June
3%→3%0pp
Stable — 8-1 vote makes June almost impossible without June 18 CPI surprise
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | BoJ: +25bp June | Jun 2026 | 59% | 38% | -21pp | SELL YES | $133K | 8/10 |
| 2 | ECB: +25bp June | Jun 2026 | 75% | 57% | -18pp | SELL YES | $347K | 6/10 |
| 3 | BOE: hike 2026 | Dec 2026 | 70% | 80% | +10pp | BUY YES | $31K | 6/10 |
| 4 | ECB: +25bp July | Jul 2026 | 31% | 14% | -17pp | SELL YES | $N/A | 5/10 |
| 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-21pp
Market price
59%
Fair value
38%
Gap: -21pp
Four-day drift: 82% (Wednesday) → 60% (Sunday) → 57% (Monday) → 59% (Tuesday). WTI's partial recovery to $92 and the deal stalling have nudged the market back 2pp, but we are still 21pp above our fair value. The core thesis holds: Japan imports 90% of its energy, and even at $92 WTI the imported inflation justification for tightening is weaker than the domestic growth picture warrants. Japan GDP at 0.5%, and the 6-3 vote majority for status quo makes a June hike structurally difficult. The deal complications (US strikes, nuclear language disputes) do reintroduce some uncertainty — which is why we raised fair value from 35% to 38% — but they do not change our fundamental read that the market remains materially overpriced. The Iran deal confirmation, when it comes, will be the catalyst that pushes this market below 50% for the last time.
▵ Bull case
- 3 hawkish dissenters: still pushing for June hike
- USD/JPY ~152: yen weakening resumes on deal uncertainty
- Deal stall: WTI stays at $92 → imported inflation persists
- Spring Shunto +5%: domestic wage argument still alive
▿ Bear case
- 6-3 vote: clear majority for hold
- Japan GDP 0.5%: no growth justification for tightening
- WTI $92 still implies disinflation trajectory vs April's $115+
- Deal will happen: BoJ knows Hormuz reopening is coming
- BoJ meeting June 16-17: only 3 weeks of data before decision
2
ECB: +25bp June — NO
↓ SELL YES-18pp
Market price
75%
Fair value
57%
Gap: -18pp
This is our most revised thesis today. April HICP came in at 3.0% — above our expectation of 2.7% and well above the ECB's 2% target. With WTI averaging ~$100-105 in May (not the $88-92 we modeled when the deal was 'largely negotiated'), the May HICP flash on Friday May 30 could print 2.6-2.9% rather than our earlier estimate of 2.4-2.7%. Bloomberg now has two ECB hikes in consensus (June + September), which is moving us from confident NO to cautious NO. We are raising fair value from 50% to 57% and lowering confidence from 8 to 6. The HICP flash on May 30 is now a true binary: below 2.5% re-widens our edge; at or above 3.0% forces an exit. Market at 75% still implies we have meaningful edge (18pp gap), but the risk is real. We hold the thesis but flag it prominently.
▵ Bull case
- April HICP 3.0%: clearly above target, gives ECB institutional justification
- Bloomberg consensus: June + September hikes — institutional alignment
- WTI May avg ~$100-105: energy component not as disinflationary as expected
- Lagarde: 'data-dependent' and data coming in hot
▿ Bear case
- ECB held in April at 3.0% rate: fresh precedent for pause at elevated levels
- HICP flash May 30 in 6 days: 3-4pp WTI drop in May's final week still helps
- ECB hiking into a slowing global cycle: institutional caution
- Eurozone growth fragile: Germany fiscal stimulus not yet fully reflected
3
BOE: hike 2026 — YES
↑ BUY YES+10pp
Market price
70%
Fair value
80%
Gap: +10pp
Unchanged and the cleanest counter-thesis in the book. UK inflation is structurally domestic — services CPI above 5% is immune to Hormuz dynamics. OECD projects UK CPI at 4% for 2026, second highest in G7. Paradoxically, the Iran deal complications strengthen this: if global energy prices stay elevated but UK CPI remains the most persistent in the G7, the culprit is purely domestic — which is exactly the scenario that forces the BOE to hike. Market at 70% for at least one hike by December remains cheap against this backdrop. June 18 CPI publication (same day as BOE meeting) is the decisive catalyst.
▵ Bull case
- UK services CPI >5%: structural, not oil-driven
- OECD: 4% UK CPI for 2026 — highest G7 after Norway
- MPC: 1 member already dissenting for a hike
- WTI $92: lower energy does not fix UK's domestic inflation
▿ Bear case
- 8-1 vote: 4 more dissenters needed to shift majority
- BOE institutional conservatism in uncertain environment
- Low $31K liquidity constrains position sizing
- Fragile UK growth: BOE wary of engineering recession
4
ECB: +25bp July — NO
↓ SELL YES-17pp
Market price
31%
Fair value
14%
Gap: -17pp
Secondary to the June thesis. The 31% market price for a July hike actually has a non-trivial internal consistency problem: Bloomberg's own consensus says June + September, not July. Even if the ECB hikes in June (our counter-thesis risk scenario), consecutive hikes in June and July are near-impossible institutionally — the ECB has never done so without a data-validation gap since 2022. If our June NO thesis is right (ECB pauses in June), July is almost certainly a hold too. Either way, 31% for July is too high. The only scenario that pays YES: June hike + HICP still above 3.0% in June → forcing back-to-back moves. Bloomberg explicitly does NOT have this in consensus.
▵ Bull case
- If June hike lands + HICP stays hot: ECB may front-load
- Energy remaining elevated through June supports case for urgency
▿ Bear case
- ECB never does consecutive hikes without pause since 2022
- Bloomberg: June + September — not July
- June pause makes July moot
- HICP trajectory will decelerate through summer
5
BOE: +25bp June — YES
↑ BUY YES+9pp
Market price
3%
Fair value
12%
Gap: +9pp
Lottery ticket. Unchanged thesis. At 3¢ YES, the asymmetric optionality remains compelling: UK CPI on June 18 revealing persistent domestic inflation (say 4.5%+ despite lower global energy) would signal a purely domestic problem that the BOE simply cannot ignore. The Iran deal paradox is real: if global oil falls but UK CPI stays hot, the culprit is structurally domestic — which logically argues for a June hike even more strongly. 8-1 is a difficult vote to flip, but 2023 showed the MPC can surprise with a 50bp emergency move when the data demands it.
▵ Bull case
- Iran deal paradox: lower global oil + persistent UK inflation = domestic emergency
- 2023 precedent: 50bp surprise hike under similar conditions
- June 18 CPI and BOE meeting same day: binary data-dependent event
▿ Bear case
- 8-1 vote: needs 4 more dissenters in <4 weeks
- BOE institutional conservatism dominates
- Lower energy headline will mask underlying services persistence