US DATA: Core PCE Inflation Confirms Acceleration Away From Target [1/2]
Core PCE inflation was close to expectations in July as the Y/Y accelerated to 2.9% for its fastest since February as it moves further away from recent lows of 2.6% having stalled above the 2% target. Recent trend rates are a little hotter but the median FOMC member will still need to see a further acceleration to meet their 4Q25 forecasts from June.
- Core PCE inflation was close to expectations in July at 0.27% M/M (MNI av of unrounded estimates 0.28) in July after 0.26% M/M in June (revised from 0.256 to 0.263), with marginal downward revisions coming earlier in Q2.
- The year-ago rate firmed from 2.77% to 2.88% Y/Y (cons 2.9), having recently bottomed at 2.6% Y/Y in Jun 2024 and Apr 2025.
- The median FOMC member expects further acceleration in core PCE inflation ahead, eyeing 3.1% Y/Y in Q4 in the June SEP (revised up from 2.8% in March) in a central tendency range of 2.9-3.4%. Latest three- and six-month run rates of 3.0% annualized in July sat between the Y/Y and this end-year view.
- The six-month run rate is still above the Y/Y, as has been the case for seven months now, but the gap is the smallest since January when it first opened up.
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FRANCE: Macron-EU Failed To Use Leverage To Scare US Into Better Trade Deal
Politico reports that, according to an official close to President Emmanuel Macron, at today's cabinet meeting, the head of state told ministers that the EU "failed to leverage its massive single market and sufficiently scare the United States into accepting a better deal". Macron is reported to have said, “We need to be feared. We weren’t feared enough”. Macron's are not the first negative comments to have come from the French gov't concerning the trade and tariff agreement with the US, with PM Francois Bayrou saying the deal marked a "dark day" for the EU.
- The article suggests that, on a more positive note, Macron praised the EU for “negotiations conducted in difficult conditions” and acknowledged that talks will continue, saying “The story isn’t over and we won’t stop there."
- As MNI's Policy team noted in the aftermath of the announcement, "France's problems with the deal may flow from the failure to reach agreement on wine and spirits, though the aircraft sector, also important to the country, won an exemption." (see 'MNI: EU States Broadly Back EU-U.S. Deal - Officials', 28 July).
- Much like the German gov't (see 'GERMANY: Fin Min: EU-US Deal Will Take Toll On Economy', 12:54BST), while the French gov't has voiced its disappointment with the deal it is unlikely that the Elysee will look to actively block the agreement, with the worst-case scenario of 30% tariffs and EU retaliation coming back into play in that scenario.
US TSYS/SUPPLY: TIPS Sizes Upped, Bills To Increase A Little More
On other aspects of the Refunding announcement outside of buybacks, first we turn to the Policy Statement:
- Guidance: The retaining of existing policy guidance was as expected by most: "Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters." Some analysts however had expected this to be tweaked to suggest a possible change in nominal coupon sizes as soon as early 2026.
- We expect that lingering expectations of a February upsizing will be pushed back to later in the year. Prior to this refunding, MNI had pushed back our expectation for the next upsizing to August 2026 from February 2026.
- TIPS Sizes Upped: Also as widely expected, the only change to issuance sizes were for 5Y and 10Y TIPS which increased for the upcoming quarter: ("Treasury plans to maintain the August 30-year TIPS reopening auction size at $8 billion, increase the September 10-year TIPS reopening auction size to $19 billion, and increase the October 5-year TIPS new issue auction size to $26 billion."). Further increases are likely for future quarters. See table below.
- Bills: Bill sizes will be upped a little more amid the Treasury General Account rebuild post-debt limit raise: "Treasury anticipates further marginal increases in short-dated Treasury bill auction sizes in the coming days and then maintaining sizes at or near those levels through the end of September. Additional increases to Treasury bill auction sizes are anticipated in October."
EQUITY OPTIONS: Large Commerzbank outright Put Option
There's been a large Long Dated Outright Put Option in Commerzbank, traded in multiple clips through the day.
- CBK (18/06/27) 24p, bought for 4.09 and 4.15 in 32k total.
Looks like a new Position.
