SPAIN AUCTION RESULTS: Bono / Obli / Green Obli / Obli-Ei

The mix this morning of: political uncertainty in Japan (various resignations across the LDP), a window-dressing UK reshuffle (not expected to resolve Starmer's popularity crisis in the near-term) and acute pressure on the longer-end of the UK, US and European yield curves - has reignited fiscal, financing and politic risk concerns around higher borrowing costs - driving sentiment through the European open.

• Sizeable down-move in GBP/USD comes despite the bullish technical backdrop that stemmed from the bullish engulfing candle posted on August 22nd. With spot showing through the lows already today, this somewhat undermines the recovery off 1.3391 and instead retracement support expected into 1.3315 and 1.3369 is of more importance.
• Today's price action serves as a further reminder of the pressure on governments from bond markets, particularly as Summer concludes. Today's Gilt price action shows markets are not satisfied with floated proposals so far for the UK Treasury to raise indirect taxes through property, capital gains, landlords, or otherwise. Given the internal party opposition to spending cuts, this places additional pressure on the Chancellor's pledge not to raise VAT, income tax or national insurance this parliament - a topic that will likely be a market focus into the Autumn Budget - and may have to become a more palatable option the longer yields stay higher.

• The Initial Yield Level in the UK 10yr has held perfectly, this was seen at 4.80%, which equated to 89.80, printed a 89.82 low and a 4.793% high so far on the day.
• As investors price less cut but also demand higher Yields on Borrowing cost, and Growth concerns, the next big Yield level would be seen at 4.921%, this was the 2025 high and the highest printed level since July 2008.

Today, reference 90.03:

• 4.921% = 88.75.