OIL: Kazakhstan Plans 1.7m Tons of Oil Exports via BTC Pipeline

The rally in core global FI markets has stalled a little.

• Futures pierced first resistance at the June 25 high (93.57), but bulls couldn’t quite force a break of the June 13 high (93.68), with the rally topping out at 93.67 before a fade back to ~93.55.
• Yields last 1.5-6.5bp lower, curve flatter.
• 2s, 5s and 10s broke below their June yield lows, exposing early May lows.
• 2s10s and 5s30s print 63.5bp and 129.9bp, respectively. Recent steepening failed to test year-to-date closing highs on both curves (78.5bp & 138.6bp).
• Little readthrough from solid cover ratio and wider tail/soft pricing combination at the latest 1.50% Jul-53 green gilt auction.
• BoE Governor Bailey spoke on QT, with some suggesting that his comments point to the potential for a slowing of sales. We will provide our thoughts on his comments and BoE QT in general shortly.
• Moves in the short end more contained, with SFIZ5 & Z6 failing to break through their respective May 9 & 8 highs, while BoE-dated OIS has failed to push meaningfully beyond pricing 55bp of cuts through year-end.
• We still point to 2x 25bp cuts from the BoE through year-end (August & November) at this stage, although risks are skewed dovishly.
• Bailey will speak again later, in a panel with other central bank heads (14:30 London). We don’t expect much new from him.
• Elsewhere, the difficulty of passage of today's welfare bill in the House of Commons may not be directly market relevant, but the scale of opposition will be closely eyed.

Eurozone June flash HICP Y/Y inflation came in at 1.97%, 3 hundredths below the rounded consensus of 2.0% (vs 1.90% May). On a monthly basis, Eurozone inflation came in at 0.28% (0.3% cons). 

• Core HICP also printed roughly in line with consensus, at 2.29% Y/Y and 0.36% M/M (2.3% cons; May 2.28% Y/Y, -0.02% M/M).
• Looking at the individual categories:
  • Services inflation printed a little higher than previously at 3.28% (3.23% May) - analysts looked for a 3.3% reading ahead of the national-level data, so that is an in line print for the category.
  • Energy inflation was firmer than before, at -2.72% Y/Y (-3.57% May) - however, that came on the back of base effects as the sequential print was a mere 0.10%.
  • Non-energy industrial goods, as expected, have been broadly stable in June, at 0.50% Y/Y (0.61% May). On a rounded basis, this means we have printed 0.5% or 0.6% Y/Y in every month of 2025.
  • Food, alcohol and tobacco inflation came in roughly in line with recent levels, at 3.11% Y/Y (was 3.19% in May).

• Analysts have been quick to highlight that the latest greenback selling has notably been paired with an adjustment lower for the US curve, which has been pertinent alongside a significant reduction in geopolitical risk premia. With US 10yr yields slipping to a 2-month low below 4.2% this morning, the Japanese yen is comfortably the best performing currency in G10.
• Price action has extended the pullback from last week’s highs to 3.4%, which has likely been assisted by a cleaner positioning profile following last Monday’s spike to 148.03. The shooting star candle formation highlights a reversal of the recent recovery and today’s weakness in particular has been exacerbated on a break of short-term trendline support, drawn from the May lows.
• As noted, the first support comes in at 142.80 (Jun 13 low), however the key short-term support remains at 142.12, the May 27 low.
• Potentially providing an additional yen tailwind, it is worth noting the Q2 Japan Tankan survey painted a resilient picture and improved capex outlook, which we wrote about in more detail here: https://mni.marketnews.com/3TgwKpZ

Source: Bloomberg Finance L.P. / MNI