EUROPEAN FIXED UPDATE: USTs await data, Bunds slip into supply after Monday's strength

USTs: +2 ticks, 110-26

• Contained in quiet newsflow. Had a slight upward bias in the early European morning but only a handful of ticks in magnitude at most. Marginal strength that faded as the morning progressed with the risk tone strong (see Equities).


• For the US, the day’s main events include a number of data points such as JOLTS, Consumer Confidence, then Atlanta Fed’s GDPNow tracker before US 7yr supply.


• The Conference Board’s gauge of consumer confidence is expected to improve to 95.8 in July from 93.0 in June. On the labour market front, June’ JOLTS job openings are seen falling a touch to 7.55mln from 7.77mln; there will also be attention on the underlying metrics; last time out, the quits rate rose to 2.1% from 2.0%, while the vacancy rate rose to 4.6% from 4.4%


• Today’s supply follows on from a strong 2yr and a more tepid 5yr outing on Monday. Updates that came before the quarterly financing estimates, ahead of Wednesday's refunding release, estimates that showed a near doubling in the overall estimate Q/Q, primarily because of a lower start-of-quarter cash balance and projected lower net cash flows.


• Today, direction will be drawn from the mentioned data points though it remains to be seen just how much the market will move into a packed second half of the week with the FOMC on Wednesday, PCE on Thursday and then NFP on Friday. If the earlier upside resumes, resistance features at 111-03 from Monday before 111-10+ and 111-14+ from the week prior.


• On the flip side, a move below the current 110-24 WTD base hits support at 110-22+ and 110-19+ from last Friday and Thursday respectively.

Bunds: -20 ticks, 129.53

• Directionally in-fitting with USTs, though trading heavier than their US counterpart so far. Pressure that is seemingly a function of the outperformance seen in Bunds yesterday with the benchmark ending the day near its 129.79 peak.


• Spent the early European morning contained near that peak and Monday’s 129.73 close. Thereafter, as outlined in USTs above, Bunds came under pressure to a 129.43 low with downside of 30 ticks at most as the risk tone picked up.


• Another contributing factor to the relative Bund underperformance may be looming supply, as the introduction of today’s Bobl line saw an unusually soft cover despite good history for Bobls generally. More broadly, Germany awaits the formal presentation of the 2026 draft finance plans to the cabinet on Wednesday after the outline was published on Monday and featured sizable spending commitments, particularly on defence; again, serves as another bearish input.


• Thereafter, the European docket is light so we await any ad hoc ECB officials to see if the expected impact of the EU-US trade deal would be regarded as more than a “minor deviation”. On the topic of the ECB, Deutsche Bank no longer expects rate cuts, instead, sees the next move as a hike at end-2026; currently, markets imply around 15bps of easing by end-2025.


• For Bunds, if a turnaround occurs post-supply, then resistance features at 130.00 from last Thursday. Conversely, if the current bearish skew extends then we look to 129.12 from Monday before the figure and then last week’s 128.84 base.

Gilts: -18 ticks, 91.26

• UK specific newsflow has been light aside from continued coverage of Trump’s visit to Scotland. From that, a press briefing is expected this morning before POTUS plays golf and then departs this afternoon.


• Thus far, Gilts have been in the red and while they have, like Bunds, been lower by 30 ticks at most, for the most part, they have been trading marginally better than their German peer.


• However, ahead of the morning’s DMO auction this flipped slightly as Bunds came marginally off lows, following a slight pullback in the equity risk tone and potentially as yields reacted to session highs in crude, while Gilts proved relatively unreactive and remained just off lows.


• Supply was strong, with Gilts lifting by a handful of ticks post-auction and now trade roughly in-line with Bunds. Leaving Gilts 10 ticks off the 91.16 low but some 20 from the initial 91.46 high


• Ahead, the UK docket is light aside from anything else from POTUS’ ongoing visit.

29 Jul 2025 - 10:15- Fixed IncomeEU Research- Source: Newsquawk