Tuesday, July 22, 2025 2:30 AM EDT
Image Source: Pexels
Markets may become more nervous with the 1 August tariff deadlines, and low summer liquidity could amplify rate moves. Fiscal concerns in many large economies add to the volatility from the back end of the curve. Challenges to the Fed's independence are also not helping US rates.
Low market liquidity can add to sharp moves in the near term
The week started with a strong bullish move in euro rates, which could happen again if markets become more focused on the bumpy trade negotiations. Over the past few weeks, markets have largely treated tariff headlines as background noise, but with the August 1 deadline approaching, we may start to see more volatility. And with market liquidity thinning during the summer, any such moves may be amplified. The sharp decline in 30Y yields on Monday, for example, was difficult to justify from the news flow alone.
The very long end of global yield curves will remain a source of volatility as the themes driving those moves are likely to linger. In Japan, there were elections over the weekend, but the fiscal outlook remains uncertain. Also, in the UK and numerous EU countries, government finances are at risk. Meanwhile, in the US, the independence of the Fed is being challenged, making the long end of the curve look more vulnerable and creating sharp rate moves like we saw last week. Part of the rally in long-dated bonds on Monday may therefore be linked to headlines about Treasury Secretary Scott Bessent’s opposition to firing Fed Chair Jerome Powell. All these drivers are unlikely to disappear overnight, which is a reason to remain more bearish on longer-dated rates.
Tuesday’s events and market views
We will get the Bank Lending Survey results from the European Central Bank, which will give insight into financial market conditions.
The UK will auction £1.7bn worth of 10Y Gilt Linkers, while Germany will have an 8Y and 10Y green Bund auction for a total of €1.5bn.
More By This Author:
Polish Rate Cuts Set To Continue Despite Strong Wage Growth FX Daily: Japan Election Results Add To Yen Uncertainty Think Ahead: Central Banks’ Unwritten Rule
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
more
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.
less
How did you like this article? Let us know so we can better customize your reading experience.
