US TSY OPTIONS: April'25 10Y Put Skew Play

The Council of Ministers is set to approve an omnibus decree later today after the gov't parties reached an agreement with the pro-Catalan independents Junts party. The decree is set to include a boost to state pensions in line with inflation and the restoration of public transport subsidies, among other measures. Last week Junts, which supports the gov't of PM Pedro Sanchez in a confidence-and-supply agreement, voted with the opposition conservative Popular Party (PP) to defeat the omnibus decree, citing a lack of trust in the Sanchez gov't. 

• After the Council approves the decree, Sanchez is expected to deliver public remarks explaining the changes made to the decree that enabled Junts to offer its support.
• While the agreement limits stability risks in the short term, over the medium-to-long term Spain's policy-making environment remains vulnerable to the whims of regionalist and separatist parties given the lack of a majority for Sanchez's leftist coalition gov't. 

E-mini weakness over the last 90 minutes seems to have factored into fresh USD demand, with little of note when it comes to macro headline flow.

• BBDXY back towards London morning highs, with the likes of EUR/USD and cable registering fresh session lows, albeit remaining comfortably within ranges seen over the past few sessions.
• Initial negative reaction to GM earnings pre-market, although the name is only indicated -0.5%.
• The move lower in equities also means that TY, Bund and gilt bears have not been able to force a retest of session lows.

• Tariff rhetoric overnight has provided some renewed demand for the greenback, and this has allowed GBPUSD to soften around 0.6% on Tuesday, pressing fresh session lows around 1.2420 in recent trade. Significantly, cable tested resistance at the 50-day EMA on Monday (intersecting today at 1.2520), and with this level holding, medium-term signals remain bearish for the pair.
• Key event risk for the pair centres around the FOMC press conference, while support levels remain much lower than current spot, initially at 1.2229, the Jan 21 low, and the bear trigger at 1.2100, the Jan 10 low.
• Fiscal matters remain in the spotlight this week with Chancellor of the Exchequer Rachel Reeves due to deliver a speech on Wednesday regarding how the government intends to boost economic growth, with a focus on planning reforms to boost house construction.
• This week will also see four members of the FPC (including Governor Bailey) testify, however comments will need to be constrained to financial stability matters given the monetary policy quiet period.