EUROPEAN FIXED UPDATE: A slightly softer end to the week, Gilts in focus and lagging pre-Pill

USTs: -2 ticks, 112-01

• A slightly softer start to the day, but once again, movement at this point is very thin in a sub-five tick range. Note, while action has intensified in the latter part of sessions this week that may not be the case today, as the docket is very light; however, any update on the Fed Chair, tariffs or geopols, among other topics, could see action intensify once again in the latter half of the day.


• In a narrow 112-00+ to 112-04 band so far. Newsflow since the Fed updates yesterday has been light. In brief, Trump appointed Miran to the Fed taking Kugler’s spot until the term ends in January. In terms of the Chair, we haven’t heard much from POTUS, but Bloomberg reports that Waller is now the front runner.


• As a reminder, yesterday evening saw the US’ 30yr tap hit to a poor reception, resulting in a full week of weak supply for the US.

Bunds: -15 ticks, 130.08

• Also a softer start to the day, though magnitudes are marginally more eventful than those outlined above.


• In a 130.01-26 band, getting back towards but still shy of Thursday’s 130.37 best. As above, drivers are light today after a packed week for markets. The European-specific docket is devoid of Tier 1 events, as such impetus may be drawn from any update to the potential catalysts outlined in UST.


• If the modest bearish bias remains throughout the day, Bunds are on track to end the week near-enough at opening levels of 130.06 despite posting a not-insubstantial 129.50 to 130.60 WTD range.

Gilts: -18 ticks, 92.22

• Directionally in-fitting with the above but magnitudes are slightly more pronounced. Opened lower by just under 20 ticks and then slipped a handful further to a 92.15 trough, but has since reverted back to between today’s 92.22 open and Thursday’s 92.40 close.


• If the 92.15 low is revisited, we look to 92.00 from Thursday post-BoE. For yields, the 10yr is off Thursday’s 4.59% WTD peak but around five bps above the 4.52% open on Monday.


• While unlikely to be quite as eventful as Thursday’s BoE, remarks from Chief Economist Pill just after midday will be in particular focus. Pill was part of the four who voted to leave rates at 4.25% (decision was, ultimately, a 25bps cut), the four’s main point of justification was “a slower loosening of policy would reduce the risk of inflation not meeting the target sustainably.”.


• Pill, even before this week, had been regarded as one of the more hawkish members of the MPC, with his dissent in May on “concern that the pace of policy withdrawal is too rapid given the balance of risks.


• Given how concerned the MPC generally, but the four particularly, seem to be about inflation and the guidance tweak in the statement itself around the restrictiveness of inflation, we would assume his concern around the pace of moderation remains or has, more likely, increased somewhat. As such, Pill may not provide anything overly surprising; though, if he more clearly leans against a Q4 cut then that could see the c. 70% chance of a move by end-2025 retreat further.


• Finally, Pill may also choose to comment on the QT programme. The MPR update on this yesterday was extensive (see newsfeed for details/analysis), but essentially made the point that of the 325bps of 10yr yield upside since QT commenced, only 15-25bps of it was down to the APF-unwind. As such, the inference could be drawn that the BoE sees no need to reduce the pace of QT due to the impact of QT itself; however, of course, the pace may well be reduced in September due to global factors and/or the decline in long-term demand, among other potential factors


• Though, given the BoE’s analysis, it remains to be seen how much influence that would have on long end yields; instead, a change to the global steepening trajectory and/or renewed fiscal confidence (Autumn Budget in focus) would likely have a much greater impact. Reminder, consensus is for a step-down from the current GBP 100bln/yr of sales to around GBP 75-80bln/yr.

08 Aug 2025 - 10:00- Fixed IncomeEU Research- Source: Newsquawk