The bond markets, which had welcomed the results of the second round of voting, suddenly became less confident in the late afternoon (shortly after 4pm).

German Bunds, which were at equilibrium when the US markets opened, fell by +4pts to 2.5590%, and our OATs by +8.5pts to 3.258% (including +4pts after 4pm between 4.216 and 4.256%): the spread with the Bund widened to almost 70 basis points.
Further south, Italian BTPs are stretching by +7pts to 3.987%, Spanish Bonos by +6pts to 3.3650% (+10pts vs. our OATs).

Across the Atlantic, T-Bonds are also +6Pts to 4.3260%, and the next 48 hours could be volatile with the release of the latest US inflation figures on Thursday, which will be closely watched by investors.

At his scheduled hearing before the US Congress today, Federal Reserve Chairman Jerome Powell may acknowledge some progress in the fight against inflation, while reiterating that the Fed remains 'data dependent'.

This is usually seen as a signal that the rate-cutting cycle is about to begin", says Christopher Dembik of Pictet AM.

According to the Fedwatch barometer, traders are currently expecting a rate cut in September, with a probability of almost 74%.

Across the Channel, Gilts are down +9pts to 4.2050%, back to their July 4 levels.


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