[MARKET ANALYSIS] US yield curve steepens on the Fed independence challenge, supply ahead

• Fixed benchmarks in proximity to the unchanged mark.
• Overnight, while modest, the bias was downward as the US yield curve steepens over Fed independence concerns and the narrative that a more dovish Fed now could lead to higher inflation and, by extension, higher rates further down the line.
• While the independence narrative is nothing new, it has been exacerbated by the subpoena of Fed Chair Powell. Short-end yields are also, potentially, hit by the measure to cap credit card interest rates for one year, a narrative that has weighed heavily on US banking names in the pre-mkt and some European peers with exposure.
• USTs at the low-end of a 112-02 to 112-11 band, posting losses of five ticks at most. Support resides at 111-31 from Friday, below that we look to 111-26 from late-August.
• By extension, the 10yr yield is at a 4.2% peak, just shy of last Friday's 4.21% high. Thereafter, we return to levels from early-September/late-August when 4.35% printed (18th Aug.).
• In Europe, action is much the same. Bunds are near-enough unchanged in 127.82 to 128.05 parameters.
• OATs in focus later in the week, see the 08:45GMT update for details.
• Gilts opened near-enough unchanged before coming under modest pressure, echoing the above. At the low-end of a 92.30-53 band with downside of 18 ticks at most.

The US yield curve steepening today is largely driven by concerns over the Federal Reserve's independence, particularly following a subpoena for Chair Powell. This dovish sentiment is contributing to higher long-term rate expectations, potentially signaling inflation risks ahead and impacting short-end yields, especially with measures to cap credit card interest. Traders should be watchful of how this narrative influences fixed-income sentiment and bank stocks, as well as forthcoming bond supply dynamics.