EUROPEAN FIXED UPDATE: JGBs lead post BoJ/Ueda, USTs await Tier 1 data points

JGBs: +20 ticks, 141.38

• The BoJ left rates unchanged as expected. JGBs were bid though as the accompanying forecasts were lowered for both Real GDP and Core CPI, pushing back the timing for when underlying inflation is likely to be at a level generally consistent with the 2% target.


• In totality, this lifted JGBs from 141.05 to 141.34 though the upside did dissipate almost entirely in the gap between the announcement and Governor Ueda.


• Ueda for the most part stuck to the script of the statement and made it very clear that the BoJ is facing significant uncertainty in its forecasts and policy decisions given the tariff and potentially stagflationary situation. Ueda’s reiteration that there will be a delay to attaining the underlying 2% inflation target sparked another bout of dovishness, lifting JGBs to a fresh 141.42 peak.

USTs: +6 ticks, 112-13

• A very slow start to the session given the absence of European participants for Labour Day (China also away).


• USTs are firmer and at a 112-12 peak, but one that is shy of the 112-16 high from Wednesday. As was the case on Wednesday, any concerted move higher enters a patch of clean air before resistance at 114-03+ and 114-10 from early-April.


• Focus for the space thus far has primarily been digesting the stagflationary prints we saw yesterday in the US and looking ahead to weekly claims before the ISM Manufacturing PMI. On the latter, after the soft Dallas Fed earlier in the week and likely exacerbated by prints since some desks were highlighting a downside bias to the 48.0 newswire consensus for the headline.


• Into the data, market pricing for the Fed continues to just about imply four 25bps cuts by end-2025. As a reminder, at this time on Wednesday, we were around 5bps short of the mark.


• Currently, the yield curve is slightly flatter but is largely holding onto the action seen yesterday post-data, with today’s movement primarily occurring in the belly of the curve.

Gilts: +29 ticks, 93.80

• Opened higher by around 30 ticks before extending a handful more to a 93.86 peak, influenced by the upside seen in JGBs post-BoJ/Ueda.


• UK specifics once again fairly light, particularly with Europe away for Labour Day. Though, we have had a few data points including an upward revision to April’s Final Manufacturing PMI (still well into contractionary territory) and a significant jump in Mortgage Lending during March; the latter comes alongside a 3bps drop in the effective rate on new and outstanding mortgages to 4.5% and 3.84% respectively during the period, and ahead of Stamp Duty alterations which kicked in alongside the new FY in April.


• Elsewhere, the UK holds local elections today and alongside these there is one by-election in Runcorn and Helsby which is in-focus as polling has recently had the Reform and Labour candidates tied, or with a slight edge to Reform, heading into it. Not a market mover, but one to keep an eye on alongside the local elections generally for insight into how Labour is performing and any potential changes to policy in the months ahead their performance may spur.


• In short, Gilts are much the same as USTs in waiting for the Tier 1 US data this afternoon for broader macro direction, and as always any fresh updates to the UK-US trade situation.

01 May 2025 - 09:45- Fixed IncomeData- Source: Newsquawk