EUROPEAN FIXED UPDATE: 40yr JGB auction weighs, awaiting US supply & FOMC Minutes

JGBs: +4 ticks, 138.99

• Pulled back at the start of APAC trade after the marked upside seen on Tuesday after reporting around the MOF.


• An acceleration of this occurred after the highly anticipated 40yr JGB auction. Overall, the outing was a disappointment, featuring an elevated yield and weak cover.


• Into the tap, JGBs were holding just above the 139.00 mark but had been a few ticks below it earlier in the session, the auction results saw a knee-jerk lower from 139.10 to 138.92 before slumping to a 138.75 session low. Lifting the 40yr yield by some 9bps on the session, but still lower by around 20bps WTD given the scale of Tuesday’s action.


• Since, the benchmark has made its way off worst levels but is still below the 139.00 mark.

USTs: -6+ ticks, 110-10

• Fell alongside JGBs after the 40yr auction results. Pressure which took USTs to a 110-07+ base and essentially eroded the strength seen after the US’ robust 2yr tap. The results of this helped to drive the complex to a 110-18 high.


• Since, specifics have been a little light as we await responses from Fed’s Kashkari (2026 voter) who is partaking in a Q&A. Ahead, the docket features a 5yr auction, FOMC Minutes, the latest executive order signing by POTUS and NVIDIA earnings.


• On the Minutes, we look for any insight or nuance to the data-dependent and meeting-by-meeting stance. However, the account is stale owing to the substantial trade alterations that have occurred since, particularly with reference to US-China.

Bunds: -11 ticks,130.84

• Hit overnight in tandem with JGBs. Since, have been a little choppy in a slim 130.73 to 131.00 band, which is just below Tuesday’s 130.75 base.


• Modest bounce on cooler-than-expected German import prices this morning, the series posted the largest M/M decline (-1.7%) since April 2020, driven primarily by energy prices.


• Thereafter, the latest ECB SCE made for grim reading, featuring a rise in 12-month inflation expectations and a cut in growth expectations for the same period to 3.1% (prev. 2.9%) and -1.9% (prev. -1.2%) respectively; no significant move on the series, though European equity bourses may have been impacted marginally.


• Ahead, dual-tranche Bund auctions due but the limited size and duration on offer means the outing should pass without issue. On the point of supply, Spain has opened a 10yr syndicated bond sale with indications of interest above EUR 105bln and guidance of around +9bps vs the 2035 benchmark, according to IFR.

Gilts: -15 ticks, 91.10

• Opened lower by a handful of ticks, acknowledging the JGB auction. Action since has been slightly bearish, in-fitting with above peers, but minimal in nature as UK specifics have been largely non-existent.


• Unfortunately, the scheduled docket ahead does not have anything of particular interest as the Green Gilt auction should occur without issue owing to its specific demand base while the text release from BoE’s Pill is a repeat of last week’s remarks.


• As it stands, Gilts reside towards the bottom end of a 91.05 to 91.22 band, notching a marginal new WTD low but holding above the figure and numerous support levels from last week between 90.11 and 90.92.

28 May 2025 - 09:55- Fixed IncomeEU Research- Source: Newsquawk