No love letters

A surprisingly strong June employment gain in the US yesterday sent 10y Treasury yields nearly 7bp higher and even more so at the front-end of the curve. Indeed, the market’s change of heart saw the implied probability of a 25bp cut for July fall to 5%. That’s back to tail-risk area. European rates – briefly interjected by the US data – remained on a downward path, as recent jawboning from ECB officials on the concerns of a EURUSD exchange rate heading and potentially exceeding the 1.20 level has revived expectations that the ECB could still cut rates after the summer, should such a scenario materialize. European bond yields also fell partly due to an FT report that the EU will propose a permanent “Joint Debt Instrument for Crisis".