EUROPEAN FIXED UPDATE: Benchmarks pressured, Gilts lag after Tuesday's data-induced gains, USTs await CPI

Gilts: -40 ticks, 92.25

Currently the slight underperformer after Tuesday’s session of pronounced gains following a dovish jobs report. At best, Gilts hit 92.87 on Tuesday but closed some 20 ticks off that high. Today, the benchmark opened softer by a handful before extending to current losses of around 30 ticks.
UK newsflow so far has focussed largely on the upcoming spending review, where Chancellor Reeves is expected to keep the emphasis on infrastructure investments and a drive to increase the UK’s growth potential. No formal forecast updates or similar expected. But, the review serves as a precursor to the Autumn Budget, ahead of which the likes of Deutsche Bank expect Reeves will have to announce tax increases of at least GBP 10bln.
On today’s review, PIMCO’s Balls said on Bloomberg TV that it should not be a significant market event.
As mentioned, Gilts in the red and around their 92.40 session low. If the move continues the figure is the first point of support before 91.89-44 from last week, including multi-session support at 91.71.
On the flip side, if a bullish move emerges at any point the current 92.64 high is only a tick above the best from June 6th, afterwards just 92.87 from Tuesday serves as near-term resistance.
Before the review, supply was due with the DMO selling GBP 4.25bln of its 4.5% 2035 Gilt. The prior was strong with a b/c in excess of 3x. Today’s tap was not quite as well received as the prior, but still strong nonetheless with no real follow-through seen in Gilts.

Bunds: -18 ticks, 130.65

Specifics for the bloc a little light early doors. Benchmark underpressure in a pullback from the gains seen on Tuesday and while Bunds are in the red today, they are still higher by around 40 ticks WTD.
No move to remarks from ECB’s Kazaks, to Econostream, who said further cuts are “quite likely” a market pricing for one or two more cuts is not out of the realm of the baseline. As a reminder, markets currently just about price one more cut in 2025 to a 1.75% terminal.
The latest ECB wage tracker showed upward revisions across the board. A series that arguably sparked a very slight hawkish reaction in Bunds. However, the benchmark was already on a bearish trajectory and nudging toward fresh session lows into the series.
Ahead, we await updates on trade ties and US CPI (see USTs for more details). For the EZ specifically, trade developments have been light with the focus firmly on US-China ties.

USTs: -2+ ticks, 110-04

As mentioned, US-China talks in London have been dominating newsflow. In brief, the talks ended at around midnight UK time, both sides said a framework has been agreed upon to implement the Geneva consensus and President’s Trump and Xi will now be consulted for approval.
Given this, we now keenly await the views of the mentioned leaders and any insight into the timing for another set of talks and/or a leaders meeting.
USTs in the red in-fitting with the above but, once again, find themselves closer to the unchanged mark than peers across the pond. Today, that is largely a function of participants awaiting the May CPI release, expected to see upticks for the main metrics except for the M/M, seen steady at 0.2%. The series will be scoured to see what, if any, tariff impacts are filtering through to prices and any insight into how permanent, or not, such upside may be.
Into the data, and 10yr supply thereafter (3yr passed with no impact), USTs are at the bottom end of a narrow 110-02+ to 110-08+ band. At the trough of but just about within Tuesday’s 110-02 to 110-14 parameters. Given this, yields are firmer across the curve which is marginally steeper.
This morning, PIMCO’s Balls said the five to ten-year part of the US curve is where you would want to be. More broadly, remarked that Japan looks like an opportunity with reference to the upcoming BoJ review.