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Pulled higher ahead of US CPI

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  • Core fixed income has moved higher this morning, with gilts seeing the biggest moves. However, the gilt curve remains off yesterday's highs while USTs have exceeded yesterday's highs ahead of the key US CPI release later.
  • Consensus puts core CPI inflation at 0.3% M/M in June as it slowed from a modest beat of 0.44% in May. There is no evidence that the downside miss in nonfarm payroll gains last Friday has deterred FOMC participants from signalling their preference to raise rates twice more this year. An above-expected print and/or a report with strong details in ex-shelter services would reinforce the "higher for longer" theme; a miss most impactful for September pricing. For our full US CPI preview, click here.
  • TY1 futures are up 0-8+ today at 111-17 with 10y UST yields down -2.9bp at 3.943% and 2y yields down -1.6bp at 4.860%.
  • Bund futures are up 0.32 today at 131.27 with 10y Bund yields down -3.1bp at 2.615% and Schatz yields down -1.8bp at 3.285%.
  • Gilt futures are up 0.60 today at 932.25 with 10y yields down -6.7bp at 4.592% and 2y yields down -8.5bp at 5.326%.

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