EUROPEAN FIXED UPDATE: USTs steady, Bunds/Gilts are bid but with little newsflow

USTs: U/C ticks, 112-06

• USTs traded with a negative bias earlier but caught a slight bid as the risk tone deteriorated a touch; in a very narrow 112-02+ to 112-06+ range. Price action overnight was lacklustre, as US paper took a breather following the bull steepening seen on Tuesday, spurred by US President Trump’s move to oust Fed Governor Cook. Today’s session has seen yields rise across the curve, generally to a similar degree.


• Recent newsflow has not really had too much of an impact on price action today; US President Trump is considering quickly announcing a nominee to replace Fed Governor Cook with Stephen Miran and former World Bank President Malpass potential candidates, according to WSJ, citing sources. It is also worth highlighting that the US Senate panel is preparing to hold a hearing next week on Trump's Fed pick Stephen Miran for the seat vacated by former Fed governor Kugler. All of this is headed towards the POTUS achieving a majority on the Fed’s Board of Governors; in the short-term, the implications of a more dovish central bank rise, but longer-term, markets may question the Fed’s independence and/or control over inflation. But there are still 12 other regional members, but recent reports suggest that Trump is also looking to strongarm that also, and is reviewing exerting more influence on them, via Bloomberg.


• On the trade front, Trump said the EU, Japan and South Korea trade deals are done and that they kept the same deal with South Korea. It was separately reported that Trump said he is getting on very well with China and President Xi.


• Ahead, the data docket is incredibly light – MBA Mortgage report is due. More focus will be on US supply, where a 2yr FRN and 5yr note are to be auctioned. This will follow on from a very 2yr outing in the prior session, which garnered a b/c of 2.69x (prev. 2.62x), a lower-than-prior high yield and a stop through of 1.5bps.

Bunds: +25 ticks, 129.68

• Bunds are outperforming vs peers; initial trade was sloppy in-fitting with global peers, but has recently picked up a little to trade higher by a handful of ticks. Currently trading at the upper end of a 129.33 to 129.71 range; the high for the day matches that made on Tuesday – Bunds surged past a double top from August 21-22 at 129.55; next near-term level to the upside is beyond the round 130.00 mark at 130.06 (high from 14th Aug).


• Nothing really fresh for the German benchmark today. Very much just cooling from the prior day’s upside, where Bunds caught a “safety” bid amidst the French political turmoil. On that, the German-French spread is a little tighter today, but still remains very much towards the highs made in the prior session (current 77.47 vs peak on Tuesday at 79.51). Briefly on France, no fundamental updates to the French PM’s call for a confidence vote on Sept 8.


• The docket is void of any pertinent European data/ECB speakers. German GfK earlier saw sentiment drop a little from the prior, and more than expected. No move in Bunds at the time. Now focus will lie on the German 7yr auction later today. On that, IFR highlights that the sale should go well given the proximity to month-end and lower volumes of issuance this summer.

Gilts: +17 ticks, 90.62

• Gilt price action today has been dictated by global peers; initially opened lower amid the subdued trade seen in USTs/Bunds, but then reversed, but without a clear driver. Currently higher by around 17 ticks, and trades in a 90.26-62 range. Do note that a relatively weak UK auction, which drew a lower-than-prior b/c - little move on this.


• Tuesday’s hefty underperformance was attributed to the region's return to holiday, and as UK traders begin to think about Chancellor Reeves’ Autumn Budget. Doing the rounds in the past couple of sessions was the Chancellor’s move to promote the current Pensions minister, Torsten Bell. He is reportedly one of the party’s “sharpest minds”, though will no doubt raise concerns amongst Gilt traders; Shadow Chancellor Stride said the appointment is suggestive of “higher taxes, more borrowing, and punishing success”.

27 Aug 2025 - 10:20- ForexEU Research- Source: Newsquawk