EUROSTOXX50 TECHS: (Z5) Northbound

• Following generally steady Asia-Pac trade, markets underwent a sharp dose of risk-off alongside the European open as a sustained shoot higher in longer-end yields unsettled sentiment across equities, currencies and bond markets. 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.
• Gains for the USD Index put the currency on for a strong start to September. The daily candle chart has the USD Index on course to form downtrendline resistance drawn off the early August high at today's 98.389 print.
• 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.
• Focus for the duration of Tuesday trade remains on the volatility in the longer-end of the curve, as well as the ISM manufacturing print for August. The release will be watched carefully for clues or signals headed into this Friday's highly consequential NFP print. 

• ERM6 98.31/98.43cs, bought for 2.5 in 10k.

This has been bought in 40k Total since Yesterday.

• Spread set earlier at 4.50% Mar-35 Gilt +8.25bp (guidance was +8.25/+8.75bps)
• Size: GBP14bln  (MNI expected GBP8-12bln with risks skewed to the higher end given the large book size)
• Books closed in excess of GBP140bln (inc JLM interest of GBP12bln - second largest ever for a gilt)
• Maturity: 22 October 2035
• Expected Settlement:  3 September 2025 (T+1)
• Coupon: 4.750% SA, ACT/ACT, long 1st to 22 April 2026
• Benchmark:  4.50% Mar-35 Gilt (ISIN: GB00BT7J0027)
• ISIN: GB00BTXS1K06
• Bookrunners: HSBC / J.P. Morgan (DM/B&D) / Lloyds / Morgan Stanley / NatWest / UBS
• Timing: Allocations to follow

Details per market source and MNI colour