EUROPEAN FIXED UPDATE: A softer start to a day headline by upcoming US risk events

USTs: -4 ticks, 110-19

• A relatively contained APAC session which was characterised by a significant amount of newsflow to digest, but nothing that has fundamentally changed the narrative for the fixed income space.


• More recently, into the European morning benchmarks across the board came under pressure. A move that has been relatively pronounced with USTs trimming by just under 10 ticks from overnight levels to a 110-19 base. No clear or overt driver behind this and the move occurred without a broader risk move but was more pronounced in EGBs (see below).


• Ahead, the US docket is headline by ISM Manufacturing, following the final S&P figure, before Fed Chair Powell provides opening remarks. On the data, ISM is expected to rise slightly in May to 49.5 (from 48.7).


• Before Powell, Goolsbee (2025) and Logan (2026) due. Goolsbee is very much data-dependent and “waiting for the dust to clear” in the short term while Logan believes policy is currently in a good place.


• Note, today’s move has been relatively noteworthy in European hours thus far but the benchmark remains just above Friday’s 110-18 base and still towards the upper-end of last week’s action; reminder, last week’s range was 109-25 to 110-30, a high that was matched briefly in APAC trade.

Bunds: -42 ticks, 130.78

• As mentioned, Bunds also found themselves coming under pressure in the European morning but to a larger extent than USTs. Again, no clear fundamentals behind it as the action has not coincided with PMIs or other updates.


• Thus far, down to a 130.72 base. While there has not been anything specific behind the EGB pressure the accompanying upside in yields, particularly relative to the US, has led to some modest strength emerging in the EUR and GBP vs the USD.


• Not a driver behind the move, but despite a handful of revisions lower from the morning’s Final Manufacturing PMIs the overall picture is a constructive one for the EZ, particularly with Germany’s internals showing “business sentiment is the most optimistic since February 2022".


• Ahead, the broader direction for fixed will likely be dominated by the mentioned US events in the absence of a fresh driver emerging.

Gilts: -28 ticks, 91.21

• In-fitting with the above, no reaction to its own PMI being upwardly revised though the 91.16 session low printed around 15 minutes after.


• Elsewhere, the latest mortgage data for April showed a larger than expected pullback in Approvals while Lending decreased significantly after a marked increase in the prior month.


• Aside from data, UK specifics are light so far aside from a handful of weekend comments from BoE’s Breeden who highlighted the weakening labour market and slowing growth and outlined a view that the BoE’s rate narrative is not a “million miles away” from the market.


• Down to a 91.16 base and holding around that mark, last Tuesday’s base at 91.08 the next point to watch and from an events perspective, BoE’s Mann at 10:30BST is the next catalyst, a text is expected.

02 Jun 2025 - 10:15- Fixed IncomeEU Research- Source: Newswires