FOMC Minutes in focus later

Core fixed income has drifted higher through the European morning session but remains within yesterday's ranges and Treasuries, Bunds and gilts all remain below the levels seen prior to yesterday's retail sales data (which saw fixed income sell-off despite coming in below consensus expectations).

• The highlight of the morning session was UK inflation data that saw headline CPI and core CPI both come in two tenths below expectations, but RPI came in two tenths above expectations. There has been little market reaction to the release, with inflation still expected to pick up later this year. Even UK inflation breakevens have not risen on the back of higher RPI data.
• Looking ahead, the FOMC Minutes will be the highlight later today, with some market participants looking for hints as to whether Jackson Hole will bring tapering talk, or if that decision is to be pushed later into the year (or even next year).
• TY1 futures are down -0-1+ today at 134-07 with 10y UST yields up 0.3bp at 1.266% and 2y yields down -0.3bp at 0.212%.
• Bund futures are up 0.22 today at 177.02 with 10y Bund yields down -1.5bp at -0.487% and Schatz yields down -0.8bp at -0.749%.
• Gilt futures are up 0.15 today at 130.01 with 10y yields down -1.4bp at 0.547% and 2y yields down -1.5bp at 0.129%.