EUROPEAN FIXED UPDATE: USTs contained into numerous US events

USTs: U/C, 111-11

• A very contained start to a packed day. In a 111-10 to 111-13 band, matching the WTD peak from Tuesday.


• The US day gets underway with ADP, seen at 75k (prev. -33k) ahead of Friday’s Payrolls. Then, Advance Q2 GDP and accompanying PCE figures hit alongside the Treasury Refunding Announcement, where auction sizes are expected to be maintained (see headline feed for a full preview). GDP is seen at 2.4% (prev. -0.5%), though the Atlanta Fed GDPNow tracker is running a little higher at 2.9%.


• Thereafter, the BoC is expected to maintain rates at 2.75% and refrain from providing forward guidance given ongoing economic uncertainty. A decision that hits just before June’s US Pending Home Sales and the Treasury press conference.


• Next, there is a bit of a scheduled gap (though, of course, we are attentive to any trade updates and particularly the debrief session for POTUS re. China) before the FOMC. The Fed is expected to maintain policy conditions, markets imply just a 2% chance of a cut; as it stands, a move isn’t priced until October (-28bps) with just under another by end-2025 (-46.4bps).


• Focus for the meeting is firmly on the potential for dissent, given recent language from Bowman and Waller around a July cut. The vote split, whether dissent occurs or not, will be a big focus of Powell’s press conference alongside the Fed’s view on tariffs, independence and the role/succession of Chair Powell. Overall, the Chair will likely keep a wait-and-see stance.


• Into the meeting, given the contained benchmark action, yields are also near-enough unchanged but with a very marginal steepening bias. An upward move for USTs brings last week’s 111-14+ high into view. On the flip side, 111-00 is the first support point before 110-24+ and 110-24 from earlier in the week.


• After all of the above, the macro docket continues with several heavyweight earnings due after the US close (see Equities), before PCE on Thursday and NFP on Friday.

Bunds: +2 ticks, 129.68

• Spent much of the European morning a touch firmer having picked up gradually throughout the European morning but action is still relatively muted into the above US risk events. As high as 129.84 with gains of c. 20 ticks at best.


• The morning has been dominated by earnings (see Equities) with the European risk tone largely contained but with some earnings-driven regional variation. Equities aside, the first readings of Q2 GDP saw stronger-than-forecast quarterly French release, In-line German and weaker Italian (Y/Y outside forecast range) & Dutch readings. No move to these.


• A bout of pressure occurred just before the EZ figure, sending Bunds to within 10 ticks of the earlier 129.51 low and back to unchanged on the session. GDP beat both Q/Q and Y/Y. No reaction to the series, with the bloc’s outlook having shifted since Q2 by this week’s EU-US trade agreement.


• Elsewhere, and possibly factoring in the bout of mentioned pressure, we have seen a bit of a renewed uptick in European equity bourses taking them back to session highs in recent trade. Additionally, the German cabinet is being presented with the 2026 budget draft, a meeting that is expected to approve at cabinet-level the significant increase in spending outlined in the draft document earlier in the week.

Gilts: +15 ticks, 91.87

• Newsflow once again non-existent for the UK. Focus on the above events.


• Amidst this, Gilts are managing to eek some marginal outperformance vs peers, with gains of 21 ticks at best vs 19 at most in Bunds. If the current 91.96 high is breached then we look to last week’s 92.15 peak and then 92.24 from the week before.

30 Jul 2025 - 10:25- Fixed IncomeEU Research- Source: Newsquawk