[MARKET ANALYSIS] USTs await US CPI, EGBs & Gilts just in the red

USTs flat into US CPI for July. Currently, in a 108-13+ to 108-17+ band. Today’s data is of note after the particularly weak NFP report last week, which saw a pullback in near-term tightening expectations leaving September essentially a coin-flip, as it stands. However, before the September Fed we get PPI, PCE, Jackson Hole, August NFP and then the August CPI series. Currently, CME pricing has September evenly split between a hold and hike; a 37% chance of a hold in October, 50% to a 25bps hike and just over 12% implied probability for a 50bps move. By end-2026 (i.e. December’s meeting) there is a 21% chance of the Target Rate still being at 3.50-3.75%, 45% probability of one 25bps hike, 28% chance to two and around a 5% likelihood of 75bps worth of tightening. EGBs devoid of specific catalysts in conditions more typical of summer markets. Bunds in a very narrow 124.63-78 band, and unchanged in that. Gilts started with a little more pressure, opened lower by 24 ticks at 87.00 before paring around half of that and now trading in-line with EGBs. Aside from CPI, the docket also features German and US supply. As a reminder, Tuesday’s 3yr auction was strong, though not as well received as the last outing.