• This morning’s mediocre Japanese 20-y government bond auction and yesterday’s meeting in the White House on Ukraine were potential drivers for any directional market action today. Quod non. Japanese yields in the 10-y+ sector closed up to 4 bps higher, but the signal this time wasn’t picked up by markets outside the country. US, EMU and UK yields currently are changing less than 2 bps across the curve in a daily perspective. Match null for now as bond investors are cautious to place strong directional bets in the run-up to Fed Chair Powells’ Jackson Hole address on Friday. Still, especially the German (3.34%) and UK 30-y yields (5.60%) are challenging multi-year peak levels. For now, market moves also in this segment of the curve remain orderly, but fiscal sustainability clearly remains a market concern as governments are preparing 2026 budget plans. In the UK, this budgetary exercise is additionally complicated by a near stagflationary context. In this respect, UK Fin Min Reeves for sure also will keep a close eye at the July UK inflation data scheduled for release tomorrow morning as the rising cost of inflation-linked notes is an important variable in UK budget calculations. Sterling traders at least take a cautious approach going into the release. The UK currency is ceding (modest) ground against the single currency, with EUR/GBP trading further off the 0.86 support area (0.8645). On broader FX markets, the dollar mostly trades marginally softer, but with absolutely no technical implications (DXY, 98.1, EUR/USD 1.168, USD/JPY 147.75). Powell apparently also ‘paralyses’ this market. Hope on potential progress regarding the conflict in Ukraine caused a better bid for most CE currencies with the forint outperforming. At EUR/HUF 393.9, the Hungarian currency is touching its best level against the euro since September last year. Gains in the likes of the zloty (EUR/PLN 4.245) and the Czech koruna (EUR/CZK 24.45) are more modest. On equity markets, the Eurostoxx 50 (+0.9%) trades less than 2% below the early March top. In the US, the S&P 500 opens little changed, but (Friday’s) all-time top is also at less than 1%.
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