[MARKET ANALYSIS] Yields continue to hold near multi-decade highs; Gilts unaffected by UK jobs
- Global fixed benchmarks continue to move lower, in a continuation of the action seen last week. Yields continue to trudge higher; the steepening seen in the last few sessions appears to have taken a breather this morning, with yields across the curve moving higher to a similar magnitude.
- Yields continue to hold at multi-decade highs; the US 30yr (5.32%) sits at levels not seen since 11 June 2007, with the next peak going back to 2004 (5.53%). As for the yield spread, the US2s30s continues to widen, now at 113bps (vs 98bps at the start of the month). To remind, front-end rates were pressured after recent soft US data which led to a dovish Fed repricing, whilst long-end rates have been impacted by fiscal/geopolitical/political uncertainty.
- USTs (-3 ticks) are off by a handful of ticks and trade within a 108-10 to 108-15+ range. Domestic newsflow has been light this morning, and will likely remain so for the remainder of the day given the lack of Tier 1 data and the summer lull. Bunds (-35 ticks) and Gilts (-30 ticks) also follow the bearish tone, but UK paper has its own data to digest this morning.
- Overall, the UK’s jobs data doesn't show a significant change in the labour market, a point that was expected heading into the release. Initial focus on the hotter-than-expected wage metrics, including the upward revision to the measure with bonuses. Additionally, the claimant count unexpectedly declined and the prior was revised down. However, this is offset by the unemployment rate unexpectedly remaining at the prior 4.9% level (exp. 4.8%) and the 3M employment change printing below the prior. Given the contrasting points from within the release, Gilts are performing about in-line with their European counterparts. For now, the data keeps the BoE's holding policy in play.
A bear steepening of this kind, where long-end yields push to multi-decade highs while the front end is anchored by a dovish repricing, is a familiar configuration: episodes driven by fiscal supply concerns and political uncertainty have historically concentrated selling at the back of the curve rather than uniformly across it, and the widening 2s30s is the standard fingerprint. The distinction worth drawing is between term-premium-driven weakness, which tends to persist until supply or policy clarity shifts it, and data-driven weakness, which reverses quickly on the next soft print; the current mix leans toward the former at the long end and the latter at the front. On the UK side, the pattern is equally well-worn: mixed labour releases with hot wages but a steady unemployment rate have tended to leave the central bank on hold, and Gilts tracking Bunds rather than idiosyncratically is the typical tell that domestic data has not shifted the policy read. Wage growth with bonuses has historically been the component the MPC weights most heavily, so revisions there carry more signal than the claimant count. The near-term tells are whether the steepening resumes or consolidates, upcoming supply at the long end, and the next round of central bank commentary against a thin summer calendar. As a desk wrap rather than a single catalyst, the signal is confirmatory of the prevailing trend.