EUROPEAN FIXED UPDATE: JGBs boosted by Ueda, USTs towards the post-Powell lows into PCE

JGBs: +20 ticks, 138.05

• Entered the Tokyo lunch break at 137.87, within proximity of opening levels. Thereafter, in reaction to the BoJ, JGBs resumed trade a few ticks lower before slipping to a 137.75 session low.


• The BoJ maintained policy conditions in a unanimous vote. Highlighting trade uncertainty and reiterating the line that they will continue to raise rates if the economy and prices move with the forecast. Perhaps the most interesting thing from the release, and possible driver behind the hawkish move, was the 2025 and 2026 core CPI forecasts being lifted to 2.7% (prev. 2.2%) and 1.8% (prev. 1.7%) respectively.


• Thereafter, JGBs picked up off that low and made their way to highs around 138.00 into the presser with Governor Ueda. Within this, he struck a dovish tone saying “No large change to central outlook that growth pace will slow down and underlying inflation stalls”, a remark that has seemingly been interpreted as pointing to less of a need to tighten. Following this, JGBs lifted from just above the 138.00 mark to a 138.18 high with upside in excess of 30 ticks.

USTs: +4 ticks, 111-03+

• Currently holds a very modest bullish bias but is essentially contained around the 111-00 mark in a 110-31 to 111-03+ band. Today, the docket is once again packed with earnings while the data docket features PCE before Friday’s jobs; note, there will be another set of employment and inflation data after this week’s before the September Fed.


• For the September Fed, markets currently imply around 12bps of easing vs c. 16bps before Wednesday’s data. Following the Fed, markets no longer imply an October cut with c. 20bps of easing currently implied vs 28bps yesterday pre-data.


• In brief, the Fed held rates as expected with the decision subject to dissent from Bowman and Waller who voted for a 25bps cut (widely expected). Overall, little move was seen on the decision itself with USTs contained.


• Thereafter, the Powell-presser was much more market significant seeing USTs fall from 111-11 to 110-30+ during his remarks. The initial move began as Powell said that “no decision” had been made regarding September, with further downside occurring as Powell outlined that they “make sure” tariffs are not inflation inducing via deployment of the Fed’s tools. A remark that pushes back on the notion of near term easing.


• On September, President Trump said he hears a rate cut will occur at that meeting.


• Back to today, PCE is expected 0.3% (prev. 0.1%) M/M and 2.5% (prev. 2.3%) Y/Y). Pantheon, on the data ahead, expects cost-push pressures from tariffs to intensify in the coming months, which should push core goods PCE higher.

Bunds: +16 ticks, 129.69

• Similarly contained, but in a slightly wider 129.46-83 band. This morning, Europe has primarily been digesting the busiest day of earnings thus far (see Equities).


• No significant move to any of the morning’s data points. Began with hotter-than-expected import prices from Germany (downside of a handful of ticks), French prelim. Inflation came in hotter-than-expected on a harmonised level while the headline figures were somewhat mixed but both dipped from the prior, lifting the benchmark but around 10 ticks.


• Thereafter, German unemployment was mixed with a lower rate but a smaller than expected change and an increase to the total. Finally, the state CPI’s from Germany saw the M/M conform to the mainland skew (uptick from the prior) while the Y/Y figures were more mixed; fleeting downside to the release.


• Overall, Bunds are modestly firmer into a busy US afternoon that also features the mainland German inflation figures. Note, ECB pricing has unsurprisingly taken a hawkish-skew this morning, in reaction to the Fed with the above French data also possibly factoring to a degree.

Gilts: +29 ticks, 92.19

• Once again the slight outperformer. But, newsflow for the UK has been essentially non-existent.


• At the upper-end of a 92.09-27 band, notching a fresh WTD peak. If the move continues, then we look to 92.63 from mid-July.

31 Jul 2025 - 10:00- Fixed IncomeEU Research- Source: Newsquawk