EUROPEAN FIXED UPDATE: EGBs and Gilts bounce while USTs remain flat into data

USTs: +2 ticks, 112-20

• Flat. In a very thin 112-16 to 112-22 bound. Numerous updates on the trade and Fed front overnight, but nothing that has fundamentally shifted the narrative as we await the Senate hearing on Miran’s appointment to the Fed and then numerous US data prints.


• Miran, Trump’s nominee for Fed Governor, will appear before the Senate at 15:00BST. Trump has been pushing for an expedited hearing process in order to have Miran in place before the September Fed. Elsewhere, we await updates from the US in the case regarding Fed’s Cook after FHFA Director Pulte postponed his press conference on the matter.


• From the data, Challenger Layoffs are up first and swiftly followed by the ADP release which is expected at 65k (prev. 104k), on this ING highlights remarks from Fed’s Waller (Chair front-runner) who intimated that weekly reports from ADP point to a continued deterioration in the labour market. Part of the anecdotal evidence that he referred to, in a CNBC interview, as underpinning his decision to call for looser policy.


• Thereafter, ISM Services due and expected to rise to 51.0 (prev. 50.1) for the headline. Ahead of this, S&P Global noted that business activity growth eased from Julyʼs year-to-date high, though firms remained buoyed by new product offerings and strong demand. Its report suggested a continued expansionary trajectory for services.


• Overall, the data will be scrutinised for insight into the labour market ahead of Friday’s NFP report where another weak release would in theory add to dovish bets, however, given how cemented short-term pricing already is (September odds at 99%) attention would primarily be on pricing for the October (50/50 for a cut, assuming a Sep. move) and with total of 58bps of loosening implied by year-end.


• Though, of course, markets could begin to price in a 50bps move at the September gathering. On the flip side, a strong report would see easing bets pare and a return of some uncertainty, from a pricing perspective at least, into the September decision.

Bunds: +26 ticks, 129.48

• Firmer, in contrast to USTs. Specifics for the region remain focussed on politics and supply.


• On the first point, French PM Bayrou is holding a meeting with the Socialist Party this morning, though the Socialists remain clear that they will not support Bayrou and the gathering is essentially a formality. As such, the base case firmly remains that Bayrou will lose Monday’s confidence vote, barring an 11th hour deal.


• Supply is the other focal point, Spain was well received and passed without incident. More pertinently, given the political situation, France sold the top-end of its forecast amount though the longer-dated cover was a little softer than is typically the case, seemingly weighing on OATs by around 10 ticks. But, particularly given the political backdrop, the auction was received well enough and OATs continue to trade broadly in line with their German peer.


• Bunds at the upper-end of a 129.27 to 129.54 band, firmer by just over 30 ticks at best but has pulled back a touch following the French sale.


• Note, no reaction to them but throughout the morning a number of institutes have updated and downgraded their outlook on the German economy for 2025 and 2026.

Gilts: +22 ticks, 129.49

• Moving in tandem with EGBs throughout the morning. Opened higher by just under 10 ticks before extending to gains of over 30 at best. Printing a 90.56 WTD high, looking to a double-top of 90.84 from last week.


• Press focus remains firmly on the Deputy PM. Given this, updates around the Autumn Budget have quietened down a touch. Yesterday, Chancellor Reeves pushed back against some forecasts that the “black hole” in UK finances is GBP 50bln in size, remarks which also saw her reiterate commitment to the fiscal rules and describe a lot of the speculation around her taxation plans as “rubbish”.


• Bloomberg estimates that Reeves will, primarily via taxes, need to raise GBP 35bln.

04 Sep 2025 - 10:20- ForexEU Research- Source: Newsquawk