EURUSD TECHS: Off Highs, But Bull Theme Remains

• WI 20Y remains stable at 4.910% going into the $13B 20Y bond auction re-open (912810UF3) cut-off, compares to last month's tail: 4.686% high yield vs. 4.671% WI.

• GoC yields have continued to be dragged higher by Treasuries ahead of 20Y US supply after a mostly one-way move higher following President Trump threatening tariffs on Russia.
• CBC reports Ontario Premier Ford could call an early Ontario election as early as next week to help respond to potential US tariffs.
• Yields are 2.5-3.5bp higher across the curve, with increases led by the belly as is the case in Treasuries.
• Can-US yield differentials are unchanged on the day at -134.5bp having lifted off recent lows of -138bps. That low was still seen a few hours after yesterday’s mostly in-line CPI report, although one that included a further solid acceleration in three-month core inflation.
• Tomorrow’s retail sales data for November likely receives less focus than usual whilst tariff threats dominate.
• Next week’s BoC decision is also secondary, with 22bp of cuts priced for a very strong likelihood of a 25bp cut to 3.00% for a little more firmly within the Bank’s 2.25-3.25% estimated range for neutral policy.

Wednesday's Europe rates/bond options flow included:

• DUG5 106.70/106.80cs, sold at 2.5 in 5k vs 1.25k at 106.675.
• DUH5 106.80/107.00/107.20c ladder, bought for 3 in 5k.
• RXH5 133.50/134.50cs, bought for 17.5 in 8.2k.
• RXH5 133.00/134.00/134.50/135.00c condor, bought for 18 in 1k.
• ERJ5 97.75/97.875/98.00c fly, bought for 2.5 in 3.9k.
• ERM5 98.00/98.25cs, bought for 2.75 in 3.4k.
• ERM5 97.87/97.75/97.62p fly bought for 2.5 in 14.8k, done straight and vs futures
• ERM5 98.00/98.50/99.00c fly, bought for 3 in 10k total
• ERM5 98.00/98.1875/98.375c fly 1x3x2, bought for 3.75 in 5k.
• ERM5 97.75/97.87/98.00c fly, bought for 1.25 in total 17k
• ERM5 97.875/98.00cs, bought for 4.5 in 5k.
• SFIK5 95.75/95.85/95.95c fly vs 95.50/95.40ps, bought the c fly for 0.75 in 5k.