EUROPEAN FIXED UPDATE: early Fed Chair nominee reports weigh on yields, benchmark gains capped by the risk tone

USTs: +2 ticks, 111-24+

• Firmer, benefitting from the WSJ reports that President Trump could announce the next Fed Chair much earlier than is traditionally the case. Trump himself has intimated he has the list down to a handful of individuals; unsurprisingly, all those on the WSJ list are or are expected to err on the dovish side of things.


• A report which, alongside commentary from other administration officials about there being room to lower rates, provided USTs with a bullish bias and pressured yields across the curve. Action that is currently, marginally, more pronounced at the long-end.


• Of course, if Trump does announce his Chair pick early and attempts to use him to influence the policy discourse this may be interpreted as an undermining of the Fed’s independence. Something that would, despite the dovish-direction of any such intervention, likely spark a sell-US reaction and weigh on USTs, in-turn lifting yields.


• USTs to a 111-28 peak thus far, notching another best for the month and now to within a point of the 112-23 peak from May, but of course still a significant distance from the mark.


• Ahead, 7yr supply rounds off the week’s taps, which have gone well thus far. Once again, numerous Fed officials due who will be scrutinised for their view on July, after Bowman and Waller in recent days, and after Powell himself had a dovish edge in some of his remarks.


• That aside, the data docket is also packed with Q1 GDP/PCE Final (seen unrevised), weekly claims (expected at 245k once again) and a handful of other metrics including pending home sales and KC Fed.

Bunds: +18 ticks, 130.63

• Also bid, in-fitting with the above. A bout of upside was seen at 07:00BST, from 130.62 to 130.74 in the space of two-three minutes. Upside that occurred alongside a soft German GfK survey, a release that shows that while the government’s fiscal support is aiding business expectations this is yet to filter through to the individual consumer level.


• Since, Bunds have continued to climb and peaked at 130.80 before experiencing a modest pullback as the morning continued and the risk tone continues to improve.


• Action that has caused Bunds to pullback from the above high by around 15 ticks, but remain in the green by a similar magnitude.


• Ahead, the docket features ECB speak from heavyweights Lagarde, de Guindos and Schnabel, remarks will be scrutinised to see how they differ from Villeroy earlier in the week who surmised that if moderate inflation expectations were confirmed, it could lead to further easing in the next six months. A comment that while in-line with current market pricing, was more dovish than markets implied at that point.

Gilts: +11 ticks, 93.29

• Gapped higher by 14 ticks and then continued to climb, above yesterday’s 93.38 open to a 93.45 high for today; just shy of Tuesday’s 93.51 peak and 92.57 from Wednesday thereafter.


• Newsflow, once again, light. BoE’s Breeden yet to provide anything pertinent to monetary policy.


• Ahead, the docket is sparse and as such Gilts will likely follow the narrative of US events, particularly anything further on the Fed Chair, and speeches from the ECB and Fed.

OATs +25 ticks, 124.16

• On the confidence motion, the parties on the left have not managed to come together and form a single, agreed upon motion. Which leaves open the possibility of more than one motion being put forward, potentially dividing the support base of it.


• Irrespective of that, National Rally’s Tanguy spoke to Politico and informed them they will not censure PM Bayrou as it would not currently be of benefit to the French people. As such, the motion will not pass and thus is no longer a potentially notable market event, unless of course the position of RN changes.

26 Jun 2025 - 10:15- ForexEU Research- Source: Newsquawk