EUROPEAN FIXED UPDATE: A contained start to the day, awaiting updates on the trade front

USTs: -1 tick, 111-08

• A flat start to the day. Updates thus far have been light and moves relatively limited as we continue to digest Trump’s tariff updates and wait for any nations to make substantial progress on avoiding/bettering the US letter or any signs that the TACO-play will/won’t prove in this case.


• US aside, the main macro update has been reports that property support could be coming in China. Reports that underpinned developers in the region and lifted the general market, potentially applying some modest bearishness to fixed benchmarks in the early European morning.


• Overall though, we are contained in a very narrow 111-06+ to 111-13+ band, the upper point is a marginal WTD high. Resistance ahead at 111-28, 111-20+ and 112-12+ from last week.


• Docket ahead has Fed speak via Waller, Musalem and Daly; follows the June minutes which revealed a divided FOMC, as expected given the dots. Most pertinently, only a few participants (likely Bowman and Waller) would consider a cut as soon as July if data arises as expected, while most viewed some reduction in 2025 as appropriate.


• Alongside the FOMC officials, 30yr supply rounds off the week’s outings. A tap that follows relatively average 3yr and 10yr issuance this week, with no sustained move spurred by US supply thus far.

Bunds: +1 tick, 129.80

• Flat/marginally firmer, in a 129.73 to 130.08 band. However, the benchmark opened near-enough at highs and has been drifting since with specifics light aside from digestion of overnight trade updates.


• For the EU, German Final CPI passed without move with the series unrevised as expected, Destatis highlights the moderation is due to continued engine price declines and a slowing of food inflation, though somewhat offset by service price upside.


• The European docket is very light today. As such, we await updates on the trade front. Thus far, Commission President von der Leyen said talks are ongoing, prior to that Reuters reported that the bloc is discussing car import quotas and export credits with the US.

Gilts: +18 ticks, 92.07

• Firmer, outperforming the above peers after gapping higher by round 12 ticks and thereafter climbing further to a 92.19 peak; action that appears to be a function of Gilts catching up to the strength seen in peers late-Wednesday.


• Since, with newsflow for the UK light aside from a few updates out of the ongoing US-France state visit (press conference expected later today), the benchmark has begun to conform to the gradual drift seen in USTs and Bunds from their overnight highs.


• Currently, Gilts remain in the green but are back towards the 92.00 handle in a 91.93-92.19 band. If the pullback continues, Wednesday’s trough was 91.53 while on the flip side a return to and above the peak brings 92.63 from Monday into view.


• Ahead, BoE’s Breeden set to speak on financial stability.

10 Jul 2025 - 10:05- ForexEU Research- Source: Newsquawk