GILTS: Pullback From Highs Extends After NFPs, BoE Eyed Next Week

Bunds sell off as BBG sources suggest that “the European Union is preparing a package of potential emergency measures to support parts of its economy that could be hit the hardest by US President Donald Trump’s sweeping tariffs”.

• The attempted mitigation of at least some of the growth shock that would stem from the U.S. tariffs is the driver here.
• Bund futures now ~40 ticks off session highs.
• Note that key support in 10-Year yields (2.654%) held for a third consecutive day.

EUR & GBP STIRs off dovish session extremes but still a couple of bp more dovish on the day when it comes to end ’25 implied rate pricing.

• ECB-dated OIS shows ~63bp of cuts through year-end, while BoE-dated OIS shows ~53bp of cuts over the same horizon, comfortably within multi-week ranges.
• The recent rally in equities has removed some of the dovish repricing seen through the London morning & early NY trade, but tariff uncertainty still lingers, limiting the scope of the pullback.

Chancellor of the Exchequer Rachel Reeves speaking in a House of Commons select committee hearing regarding last week's Spring Statement. Livestream here. Asked by opposition Conservative MP John Glen whether she can rule out raising taxes in the October Budget, Reeves says that she will 'not need to repeat' the scale of tax rises that was seen in the 2024 budget. 

• Regarding the upcoming imposition of US 'reciprocal tariffs', Reeves says "I do believe in free trade" and claims "the UK does have balanced trade with the US." Says "We do not want to see trade barriers go up but fall...not just with the US...but the EU, India and other countries..."
• Asked whether the UK will impose retaliatory tariffs, says "Let's first see how other countries respond...Big UK exporters don't want gov't to rush into a response." Regarding the UK's stance on US tariffs, which has been seen as less combative than the EU, says "We do not want to do anything that will undermine an economic agreement with the US...We are not going to rush into action to get a quick headline."
• Reeves: "Specific tariffs on the UK are less relevant than the global demand picture...Even if [a deal] with the US is possible, it does not mean we are out of the woods."
• Says she understands the US' position with regard to its trade balance, but that the UK is not the root cause of this.