Economic Performance - The UK economy stagnated in July, highlighting challenges for the government in promoting growth and repairing public finances ahead of the high-risk budget in November [1] - Manufacturing decline offset growth in services and construction, aligning with economists' expectations [1] - Economic growth rate slowed from 0.3% in the three months to June to 0.2% in the three months to July [1] Government Response - The Treasury acknowledged the need for more work to stimulate economic growth, indicating that while the economy has not collapsed, it feels stuck [1] - A new "Budget Committee" has been established by Starmer to coordinate efforts between Downing Street and the Treasury ahead of the budget release on November 26 [1] - The government claims to be making progress in reversing the investment shortfalls from previous Conservative administrations [1] Fiscal Challenges - Economists predict that Reeves will be forced to increase taxes in the budget, with estimates suggesting the government may need to raise over £20 billion to fill fiscal gaps [2] - The Bank of England is expected to maintain interest rates at 4% during the upcoming meeting, having cut rates five times since summer 2024 [2] - July's inflation rate was reported at 3.8%, significantly above the Bank of England's target of 2%, with signs of a deteriorating labor market [2]

Core Viewpoint - The recent court ruling against Trump's tariffs could lead to the return of previously collected tariffs, worsening the already strained federal finances in the U.S. [1][3][4] Group 1: U.S. Treasury Market - Most U.S. Treasuries faced selling pressure, with the 2-year yield rising by 3.5 basis points to 3.658%, the 10-year yield increasing by over 6.3 basis points to 4.289%, and the 30-year yield climbing by over 6 basis points to 4.978% [1] - The court's decision may result in a significant increase in bond issuance and yields if tariffs are refunded, as noted by policy experts [4] Group 2: International Bond Markets - Major overseas bond yields have also surged, with Germany, Italy, and France seeing their 30-year bond yields reach the highest levels since 2011 [4] - On September 2, German 10-year yields rose by 4.5 basis points to 2.792%, and 30-year yields increased by 5.1 basis points to 3.412% [4] Group 3: U.K. Bond Market - The U.K. bond market is under pressure as the Labour government attempts to address a fiscal gap of £20 billion to £25 billion, leading to rising yields across the board [5] - The 2-year U.K. bond yield increased by 4.7 basis points to 4.016%, while the 10-year yield rose by 5.8 basis points to 4.808%, marking the highest levels since 1998 [5] Group 4: Currency Movements - The British pound fell by 1% against the U.S. dollar, indicating a lack of confidence in the government's ability to stabilize finances [6] Group 5: Japanese Bond Market - In the Asia-Pacific region, Japanese bond yields showed mixed results, with the 10-year yield decreasing by 2 basis points to 1.604%, while the 30-year yield rose by 5.2 basis points to 3.242% [8] Group 6: U.S. Treasury Issuance - The U.S. Treasury is set to issue a total of $291 billion in bonds, including various maturities, on September 2 [9]