[MARKET ANALYSIS] USTs await Warsh, Bunds/Gilts remain pressured amidst higher gas prices whilst OATs digest the first French Presidential debate

• Fixed benchmarks are under very mild pressure this morning, but with price action ultimately muted ahead of the day’s key risk events. USTs (-1 tick) trade within a narrow 108-16 to 108-20 range, whilst Bunds (-17 ticks) and Gilts (-20 ticks) are hampered by elevated gas prices.
• USTs are trading in an exceptionally thin range this morning as attention remains on two key risk events. Firstly, Fed Chair Warsh is set to speak at 15:00 BST (10:00 EDT). Whether he touches on monetary policy remains to be seen, but even if he doesn’t, there is a risk markets will begin to price in credibility woes once again. At the same time as Warsh, the BLS will release the annual NFP benchmark revision; consensus sees a revision of +200k.
• From a yield perspective, the US30yr (5.19%) has stabilised from the extremes seen last week; similarly, the US10yr (4.67%) holds shy of the levels seen when the Treasury announced its long-end support measures. If Warsh leans in a hawkish direction today (or markets perceive his comments as so), the 10yr has a bit of clear air to the 4.71% mark.
• Over in Europe, EGBs and Gilts have been subject to a few days in the red, as gas prices remain elevated. A lot of that pressure is attributed to fears surrounding low gas storage, and recent punchy rhetoric out of Russia has also not helped the mood.
• For France specifically, OATs have had the first Presidential debate to digest. Ultimately, there was no clear victor, but the confab made evident the stark contrast in views held between parties. This can be evidenced in the 10yr OAT/Bund spread, which remains near recent highs at 85bps, but ultimately fairly stable today.
• OATs are faring a touch better vs peers this morning, potentially as leading candidate Le Pen provided further colour on how she would solve France’s debt problem. She noted that spending needed to be cut, arguing that France should not commit more than EUR 5bln to the EU (vs ~EUR 29bln in 2026). She said she would present a EUR 125bln cost-cutting plan before the next budget debate, which will only happen once PM Lecornu submits the 2027 budget bill (end-Sept).

Sessions framed around a single Fed speaker and a data revision tend to produce exactly this pattern: compressed ranges in USTs with the real price discovery deferred to the event window. The credibility premium angle is the established mechanism here; when markets question a Fed chair's independence or policy consistency, it has historically shown up in term premium at the long end rather than in the front end, which is why the 30yr stabilisation and the 10yr's clear air above are the operative levels rather than anything in bills. The benchmark revision is a known calendar fixture that routinely moves rates only when it reshapes the labour narrative the committee is working from, so its interaction with the speech matters more than either alone. On the European side, gas-driven pressure on Bunds and Gilts is a familiar energy-supply channel: low storage plus Russian rhetoric tightens the inflation risk premium in core and peripheral curves simultaneously, and episodes of this kind have tended to persist as long as storage refill concerns do. The OAT/Bund spread near recent highs reflects the standard French political risk transmission, where fiscal credibility debates widen the spread and concrete consolidation plans narrow it; Le Pen's cost-cutting outline is the kind of headline that has historically bought temporary respite without resolving the underlying budget arithmetic. The tells from here are whether Warsh's remarks shift the long-end premium, how the revision lands against the prevailing labour read, and whether OAT outperformance holds into the autumn budget calendar.