EUROPEAN FIXED UPDATE: A mild upward bias after two sessions of relatively marked pressure

USTs: +2 ticks, 110-28

• A firmer start to the day, in contrast to the modest bearishness seen on Tuesday. However, action thus far is very limited in nature with USTs confined to a 110-24 to 110-29+ band, within Tuesday’s slightly more expansive 110-21+ to 111-01+ parameters, and by extension shy of Monday’s 111-12+ WTD peak.


• Docket ahead, aside from likely further trade updates, we have a 10yr note sale (3yr was average, no significant move seen) and the latest FOMC Minutes.


• An account of the June meeting, where rates were left unchanged and the statement featured only a few language tweaks. Focus will be on any further details around the dot plots (median unchanged, composition more hawkish) and other points of guidance. Since, Fed officials have taken a wait-and-see approach though Bowman and Waller have spoken about the possibility of a July cut (-1.1bps currently implied).


• Elsewhere, but sticking with the Fed, Trump has continued his criticism of Chair Powell. Separately, the WSJ reports that White House NEC Director Kevin Hassett has emerged as a contender to be the next Fed Chair, potentially superseding early favourite Warsh, a former Fed governor. Interestingly, the WSJ reports that some people close to Trump are said to be concerned that Warsh would not be a supporter of lower rates.


• The WSJ report also adds that Trump is at various points said to have told Treasury Secretary Bessent that he wants him to be the next Chair, and has reportedly considered having him hold both positions; the source cited by the WSJ was unable to tell if Trump was being serious on the latter point.


• To briefly recap trade updates, EU-specifics covered in the Bund section, Trump said he has a good relationship with China lately, reiterated the BRICS would be hit by 10% “pretty soon” and outlined his thoughts on various potential sector-specific measures, e.g. pharmaceuticals and metals.

Bunds: +7 ticks, 129.71

• Also experiencing a strong start to the day. At the top end of an 129.54 to 129.89 band, though still with a little way to go before Tuesday’s 130.10 peak and by extension the 130.62 WTD high from Monday. Overall, while firmer this morning, Bunds are still lower by over 60 ticks WTD.


• As alluded to above, a few pertinent EU-specific trade updates to be aware of. Firstly, Trump said the EU has been treating the US very nicely and they are probably two days off sending the EU a letter, which means a deal.


• Secondly, FT reports negotiators are nearing a deal in the form of a temporary “framework” agreement to 10% tariffs while talks continue; bloc reportedly does not expect the same market access the UK managed to secure for autos and steel.


• Reports which have helped to underpin the European risk tone (see Equities), though Bunds are firmer despite this. But, as discussed, the upside is limited in nature and more a function of Bunds retracing some of Tuesday’s supply-induced pressure (primarily from EU debt) than a pronounced move higher.


• Ahead, aside from trade updates, we look to the German Chancellor’s general debate in the Bundestag on the budget. The decision on the draft 2026 budget is expected on July 30th. Alongside this, Politico adds, from around 12:00BST Merz will answer MPs' questions on the budget and other topics.


• We have already had a few remarks from Merz this morning, trade-related ones as you would expect though some interest around his commentary on Ukraine, where he said that diplomatic means to conclude the war have been exhausted. A line that seemingly sparked some modest crude upside.


• Elsewhere, dual-tranche supply is due at 10:30BST. From this, the 2044 line is in focus after a comparably weak outing in April. Thereafter, ECB’s Lane, de Guindos & Nagel are all scheduled; the Chief Economist is expected to release a text on monetary policy.

Gilts: +4 ticks, 91.65

• In-fitting with USTs and EGBs. Firmer by a handful of ticks with newsflow light as the UK has already secured a trade deal.


• Off best, but still firmer, in a 91.63-83 band; as is the case for USTs and Bunds remains shy of peaks at 91.98 and 92.63 from the last two sessions.


• Supply was broadly in-line with the last 2035 tap, no significant reaction seen in Gilts.


• The docket ahead has BoE’s Bailey speaking from 11:00BST on the semi-annual Financial Stability Report, scheduled for 10:30BST. In November, the report outlined that core sterling markets had functioned effectively (in the context of yield moves around the Autumn Budget). More broadly, the FSR highlighted elevated global risks but determined that the UK’s banking system was strong and its businesses/households were resilient.


• Finally, PM Starmer is again meeting with French President Macron, though no media appearances are scheduled until Thursday.

09 Jul 2025 - 10:20- ForexEU Research- Source: Newsquawk