KBC Sunset Market Commentary 09/07/2025 via Trader Talent

KBC Sunset

Wednesday, July 9, 2025

Daily Market Overview

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Markets

• Hardly any data on the agenda to inspire core markets’ trading today. There were also no new headlines from the likes of the UK or Japan highlighting debt sustainability concerns, allow the a momentum slowdown/pauze in the sell-off of ultra-long bonds. Time maybe for some technicals/nearby barriers to do their job. At 3.06%, the Japan 30-y yield has the all-time top (3.20%) in sight. For the UK 30-y yield (currently 4.46%), 4.50% is the final hurdle ahead of the April multi-decade top (5.66%). In this respect, BOE governor Bailey, in comments on the financial stability report, said that the Bank will reflect on curve steepening in the QT decision for the next 12 period starting in October. Similar pattern/nearby resistance for the 30-y German yield (currently at 3.16%, with the March top/2023 top at 3.25%). US yields over the previous week also joined the steepening move. However as markets are still pondering the chances of a resumption of the Fed easing cycle later this year, US (LT & ST) yields are developing in a more neutral/sideways trading pattern. The US 2-y (3.90%) and 10-y (4.40%) yield are a point in case of more sideways oriented ranges (respectively 3.70%/4.10% and 4.10%/6.65%) (cfr graphs infra). Even for the US 30-y yield, while nearing the 5% barrier, the technical resistance levels are somewhat further away (5.2% area). For (US) bond markets, the minutes of the June Fed meeting (this evening), a 10-y (also today) and especially a 30-y US Treasury auction (tomorrow) might provide some additional insight on the short-term market momentum regarding curve steepening. US yields are easing less than 2 bps. German yields ease by a similar ‘amount’. Consolidation, nothing more than that.
• As was already was the case of late, the heavy flurry of trade(war) messages from president Trump again had hardly any lasting negative impact on global (FX, yields and equity) markets. Only specific markets (e.g. copper) showed a spike in volatility. Even so, we keep an eye at financial measures of US inflation expectations. E.g, the USD 10-y inflation swap this month rose about 10 bps (2.57%). Nothing really specular, but worth keeping an eye on. European equity markets in the meantime apparently still draw comfort (EuroStoxx +1.4%) from comments (Bloomberg, amongst others) that EU is close to a trade deal with rumored tailor-made exceptions for some sectors of even companies (Airbus, German carmakers with a US production). US equities open marginally higher (S&P 500 + 0.4%) with record levels within reach. On FX markets, USD moves are limited. The greenback maintains recent gains but fails to extend them (DXY 975, EUR/USD 1.171). Yen underperformance is tempering (USD/JPY 146.5).

News & Views

• The Czech unemployment rate remained at 4.2% in June. Compared with a year ago, the jobless rate is now 0.6 ppts higher. When adjusting for seasonal effects, the jobless rate rose slightly to 4.5%. That’s the highest since 2017, signalling a gradual cooling of the labor market. This is primarily attributable to the downturn in manufacturing, which has been reducing employment for the third year in a row. In this respect KBC Economics views the latest industrial production data, which signal a stabilisation, with slight optimism. And considering new orders and improved business sentiment (eg. June PMI), it is also a key variable for further developments on the labour market and one of the important arguments why the domestic labour market should stabilise over time. In a broader perspective, KBC Economics’ sticks to the overall story of a continued recovery of the Czech economy with a 0.3% Q/Q growth expected in Q3.

• China’s State Council unveiled new measures today to stabilize employment. These include expanded social insurance subsidies, special loans, and targeted support for young people looking for jobs. The support comes as the country’s domestic economy is struggling while the trade war with the US is weighing on the export sector. Latest unemployment figures showed China’s unemployment rate at a relatively low 5% in May after having hit a 2-year high at 5.4% in February. Youth unemployment, however, is far higher with the jobless rate for 16- to 24-year-olds (ex. students) coming in at 14.9% while that for 25- to 29-year-olds (ex. students) stands at 7%.