MEXICO: Banxico's Heath Highlights Challenges To Meeting Inflation Target

Belgium will look to sell the following OLOs at its auction next Monday, with the target size set to be announced on Friday:

• the 2.60% Oct-30 OLO
• the 3.10% Jun-35 OLO
• the 3.50% Jun-55 OLO

• USD is being sold in recent trade - helping boost EUR/USD through yesterday's highs just a few minutes out from the 4pm WMR fix. The volume impact is evident here: very, very decent size crossing in the past few minutes: almost 10k contracts trade over ~5 minutes for a cash equivalent of ~$1.4bln

Gilt futures have pierced initial resistance at the 20-day EMA (91.97), now +35 ticks versus yesterday’s settlement at 92.13 and a more notable +67 ticks up from earlier session lows. A clear break of the 20-day EMA would call into question the current bear cycle, and signal scope for a push towards 92.24 (July 15 high).

• Beta to US Treasuries appears to have been the main driver of this afternoon’s Gilt rally. US Treasury Secretary Bessent continued to suggest that an ousting of Powell as Fed Chair is unlikely in the short-term. This will be helping to assuage immediate concerns around Fed credibility/independence, pulling down US breakeven inflation rates in the process.
• Gilt yields are 2.5 to 4bps lower across the curve, with UST yields down 3.5-4.5bps.
• Bund futures have also been supported this afternoon, currently +28 ticks at 130.73, at fresh session highs and probing initial resistance at 130.76 (Jul 4 high).
• BTP futures underperform Bunds (+17 ticks at 121.37), owing to the 1% intraday fall in European equities.
• The 10-year Gilt/Bund spread is now 1bp tighter today at 198bps, after briefly piercing the 200bps handle this morning after the UK public sector finance data.