Created
: 2025.09.03
2025.09.03 19:34
The global bond market rout stretched into a second day, weighing on equities, boosting gold prices to new highs, and lifting US Dollar (USD) against most currencies. The bond market sell-off reflects genuine concerns over fiscal profligacy across Europe and the US, BBH FX analysts report.
"However, the latest surge in longer-term bond yields, spearheaded by gilts, looks exaggerated given robust demand from investors. Yesterday, the UK raised £14 billion from a 10-year gilt syndication, its biggest on record and more than 10 times the amount offered. Also, Japan's 10-year bond auction saw its strongest demand since October 2023. Today, Germany is set to sell €5 billion worth of a 10-year bonds. Tomorrow, France plans to sell 10, 15, and 30-year bonds while Japan is scheduled to sell a 30-year bond."
"In the meantime, a dovish Fed can put additional downward pressure on USD and support risk assets. The US August ISM manufacturing print reinforced the case for a 25bps Fed funds rate cut in September. The headline index recovered less than expected to 48.7 (consensus: 49.0) vs. 48.0 and details were mixed. New Orders index point to improving demand conditions, Prices Paid index indicate softer inflation pressures, and the Employment index signals the labor market slump is moderating."
"The US July JOLTS report is due today. Job openings are expected to fall to a fourth-month low at 7382k vs. 7437 in June. More importantly, the ratio of job openings to unemployed workers has largely been stable at a level that suggests demand and supply for labor are roughly balanced. In contrast, the policy-relevant private non-farm payrolls data shows labor demand may be on the edge of a sharp decline."
Created
: 2025.09.03
Last updated
: 2025.09.03
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