EUROPEAN FIXED UPDATE: Pushed lower by the tariff deadline extension and a packed supply docket

USTs: -3 ticks, 110-26+

• A slightly softer start to the day. In the red with the risk tone, broadly speaking, constructive as while Trump has sent out tariff letters, he enacted the expected tariff deadline delay to August 1st from July 9th.


• As it stands, we are waiting to see what deals the US administration will announce today after receiving numerous updates on Monday. From those, the likes of Japan and South Korea have been on the wires outlining that negotiations are continuing into the new tariff deadline.


• Thus far, benchmark down to a 110-27+ trough, taking out Monday’s 110-29 base and now looking to 110-25, the WTD low from the last week of June.


• The magnitude of reaction in USTs is, relatively, minimal thus far; ING makes the point that the limited reaction is a function of the market waiting to see what actually happens between now and August 1st, rather than presupposing any outcome


• Ahead, aside from likely tariff updates we have the NY Fed SCE and a 3yr auction.

Bunds: -49 ticks, 129.57

• Also in the red, but with losses much more pronounced so far. Pressure comes as the risk tone is positive after the August 1st tariff deadline, removing any haven allure, with the EU specifically benefitting from reporting suggests there is a pathway to the EU ending up with just the 10% baseline tariff.


• On this, Politico reports the US has offered an agreement which keeps a 10% baseline tariff with some exceptions for sectors deemed sensitive, i.e. aircraft and spirits. However, caveating the positivity somewhat, Politico cites diplomats from an EU Monday evening meeting who said they have received no US guarantee that there won’t be further tariff U-turns.


• Pressure in EGBs has been increasing throughout the morning, initially modest in nature with limited reaction to German trade figures. Thereafter, a slight intensification of downside occurred alongside the cash equity open, alongside a volume spike, and the benchmark has meandered lower since to a 129.53 trough.


• Aside from trade, EGBs also weighed on as we await details on demand from the EU’s new 2032 and reopening of 2045 issuance. Bunds specifically look forward to a Bobl tap; should go well with strong history for the line.


• Altogether, the above factors are pressuring Bunds and lifting yields with the German 10yr above 2.65%, its highest since May 22nd. By extension, ECB pricing is turning marginally more hawkish with just over 1bps of implied easing for July and only 22bps by end-2025.

Gilts: -45 ticks, 91.70

• An absence of UK specific factors as a trade deal with the US has already been attained.


• Domestically, newsflow is focussed on the state visit by French President Macron, a visit that is expected to heavily focus on migration; while this could provide some tailwinds for PM Starmer, it is unlikely to spark any significant change to the in-focus fiscal narrative.


• Down to a 91.66 low, weighed on by 49 ticks at most after ending Monday’s session in the red by around half of that. If the downside continues, the 2nd July low at 91.63 is first up before 91.56 from and 91.16 from mid-June.


• Most recently, though not sparking any Gilt follow-through, Sky’s Conway reports the UK is set to miss the original deadline to finalise its aluminium/steel deal with the US, insiders are reportedly hopeful that Trump will not increase relevant tariffs to 50% from 25%.

08 Jul 2025 - 09:55- ForexEU Research- Source: Newsquawk