US: 'Big Beautiful Bill' To Reduce US Population Growth - CBO

TD Securities analysts now see the Fed's easing cycle resuming in September (vs October previously), with cuts to follow in October and December, then quarterly to 2.75-3.00%. The implied 150bp of total cuts in that outlook is unchanged from their previous view, it's just the start that has been brought forward a month.

• The impetus for the change is today's inflation report, which "could help shift the views of several Fed officials that were likely on the fence regarding the next policy move", as "the core price increase helped to allay concerns about an imminent spike in consumer prices due to tariffs". (They pencil in a 0.25% M/M core PCE rate for July).
• They write that there could be explicit communication to this effect as soon as next week: "We also now look for Chair Powell to communicate the Fed's lean toward easing in September in his Jackson Hole remarks next week. While there are still key data to be published before the next FOMC meeting, we believe the Chairman can suggest as early as next week that economic conditions are such that it supports policy re-calibration from a still modestly restrictive policy stance."

White House Press Secretary Karoline Leavitt is shortly due to deliver her first press conference since July 31. LIVESTREAM In around an hour, State Department spokesperson Tammy Bruce will brief reporters at State. LIVESTREAM 

• The White House presser is likely to be dominated by President Donald Trump's announcement yesterday that the federal government would assume temporary control of the Washington, DC police force and deploy 800 National Guard troops to tackle crime in the US capital. The federal takeover is expected to last 30 days and comes after Trump deployed 4,700 National Guard members and Marines to Los Angeles to quell protests related to White House immigration policies.
• The White House confirmed this morning that South Korean President Lee Jae Myung will meet Trump at the White House on August 25 for a first meeting between the pair since Lee took office in June. Lee’s three-day trip takes place less than a month after Seoul struck a trade framework with the US to avoid a 25% across-the-board tariff.

European curves bear steepened Tuesday.

• US CPI data in early afternoon was the session's global focus, and initially brought a positive reaction in core FI as it appeared to allay fears of upside pressure on goods prices from inflation.
• However the move swiftly reversed, with Bunds leading a global selloff. There was no identifiable trigger for the long-end German sell-off, which saw 30Y yields hit the highest since 2011 amid heavy volumes in futures.  10Y German yields stopped just shy of the July high of 2.769% (hitting 2.758%).
• There was some extension of the selloff in sympathy with long-end Treasuries as President Trump said on social media that he was considering allowing a "major lawsuit" against Fed Chair Powell to proceed.
• That said, Gilts underperformed Bunds on the day. The August UK labour market release was on balance stronger-than-expected, bringing a mildly hawkish market reaction, though private sector regular pay data remains consistent with slowing wage growth. Our review of the data is here.
• Both the German and UK curves bear steepened, with periphery/semi-core EGB spreads closing mixed.
• Wednesday's calendar is lighter, with final Spanish and German CPI readings on offer.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.3bps at 1.967%, 5-Yr is up 2.9bps at 2.318%, 10-Yr is up 4.8bps at 2.744%, and 30-Yr is up 7.3bps at 3.299%.
• UK: The 2-Yr yield is up 2.2bps at 3.885%, 5-Yr is up 3.9bps at 4.04%, 10-Yr is up 6.1bps at 4.626%, and 30-Yr is up 7.5bps at 5.467%.
• Italian BTP spread down 0.1bps at 78.8bps / French OAT up 0.5bps at 66.8bps