•Meanwhile in markets, fear is nowhere to be found even as the Iran truce *officially* expires at midnight (01:00 CET) and with a second round of talks in Islamabad still up in the air;

•According to the BBC correspondent in Tehran, a second round of talks is more likely to take place than not. Tehran had to make its point by dragging its feet on talks and tie a second round to the US lifting its own blockade of the Strait of Hormuz, so the Beeb says. Note that reports yesterday mentioned that the Iranians will send a delegation to Pakistan. However, it was not clear if the delegation has real negotiating powers or if they travel to Islamabad out of courtesy for the hosts, the Pakistanis;

•If you take remarks by Iranian officials at face value, the US blockade must be lifted first before any serious discussions on a peace deal can take place. Now, an armchair geopolitical expert such as yours truly can easily come up with a face-saving way of lifting the blockage: by allowing some ships through out of courtesy;

•Meanwhile, President Trump boasted that he will go back to bombing stuff if the cease fire expires. There’s credibility to Trump’s threat in the sense that there’s now a third carrier positioned in the region. Predictably, the Iranians made similar threats (new weapons, cards up their sleeves, and whatnot). But what I think is most telling is that Trump quietly shifted the truce expiration deadline to Wednesday evening Washington time. Which allows for another day of back-and-forth signaling between the Americans and the Iranians to come up with a face-saving formula for those second round talks to take place;

•Turning to some market commentary, Asian equities are up modestly this morning while S&P 500 futures are grinding higher. US Treasury yields are rock steady, having erased about half of the truce rally declines. Brent crude oil prices aren’t moving much either, with the nearest-dated future hoovering around $95 a barrel. European natgas future prices are grinding lower and we’re much closer to the pre-war levels than the March panic highs. In FX, the broad dollar is steady and in the major crosses we don’t see much in the way of movement either. Of note is CHF strength versus the Greenback. At 0.78, we’re near the lowest level in a month or so;

•Overnight, ECB President Lagarde hit the wires, joining the chorus of ECB-speakers calling for a hold and a ‘taking stock’ meeting in Frankfurt next week;

•Keep an eye on Romanian bonds, which have underperformed because of the domestic political turmoil. The government of PM Bolojan is about to collapse, which would spell trouble for the austerity drive that had underpinned the rally in the country’s eurobonds. Remember that the budget calls for a headline deficit of about six percent of GDP this year, down from around eight percent last year;

•And speaking of budgets, wire reports mentioned that Italy forecasts its headline deficit to print under three percent of GDP this year despite the gloomy growth outlook. With ECB rate hike pricing having eased, peripheral spreads have retraced much of their recent widening;

•Looking ahead, we have a calendar full of ECB-speakers, who are now by and large on the same page as far as the April meeting is concerned: a hold. Other events include Kevin Warsh’s confirmation hearing as the next Fed Chairman. On the data docket we find US retail sales. Finally, we will be watching Iran headlines, of course. Pay specific attention to VP Vance’s travel plans. If he wants to arrive in Islamabad in time for meeting the Iranians tomorrow – it’s a 16-hour flight from Washington – he must leave this morning local time (Eastern Time).

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