EU Midday Digest - 13 Aug 2026

US 30‑year Treasury yield climbs above 5.2% as supply surge pressures long‑end rates.

Overnight & European Session

Asian markets slipped on a modest 0.1% month‑over‑month CPI rise that kept headline inflation above the Fed’s 2% target (BLS Consumer Price Index release). In Europe, the euro‑area cash share held at 56% of transactions, limiting any immediate “cash‑drain” impact on short‑term rates (ECB payment‑statistics release). The euro slipped to 1.1541 against the dollar (‑0.03%) while the dollar index fell to 100 (‑0.12%). US Treasury yields eased slightly, with the 2‑year at 3.71% (‑0.62%) and the 10‑year at 4.68% (‑0.04%), but the 30‑year rose to 5.25% (+0.21%). The divergence between Asian CPI‑driven caution and Europe’s steady cash usage underscores a split in rate‑sensitivity across regions.

Key Themes Today

• US Inflation Stickiness: The BLS data showed all‑items CPI up 3.4% YoY and core CPI up 2.5% YoY, with shelter costs identified as the primary driver of the 0.1% MoM headline increase (BLS Consumer Price Index). Analysts argue that the underlying price pressure keeps inflation “sticky” above the Fed’s 2% goal, suggesting short‑term Treasury yields will remain elevated as markets price a slower disinflation trajectory.
• Euro‑Area Cash Resilience: ECB payment statistics reported cash accounting for 56% of retail transactions and 78% of total value in August 2026, a marginal decline from the previous year (ECB). The slower‑than‑forecast decline in cash‑transaction volume (‑2.1% annualised vs. the projected ‑4.5%) implies that monetary‑policy transmission through cash‑based channels remains robust, limiting upside pressure on short‑term euro‑zone rates.
• UK Growth vs. Investment Divergence: ONS data revealed a 0.7% QoQ rise in real GDP (annualised 2.8%) driven by services (+0.9%) while business investment fell 3.2% YoY to £12.4 bn (ONS). The split suggests a “soft‑landing” narrative for the UK, supporting risk‑on equity exposure in services (e.g., HSBC, Diageo) but prompting caution on capital‑intensive sectors such as manufacturing and IT, where capex is contracting.
• Canada Rate Hold and Forward Schedule: The Bank of Canada kept its overnight target at 2.25% (Bank Rate 2.50%, Deposit Rate 2.20%) and published its 2027 policy‑rate calendar (Bank of Canada press release). The pause signals confidence that inflation pressures are contained, while the transparent schedule should compress bid‑ask spreads on CAD‑denominated instruments and reduce event‑risk premiums around future meetings.
• Long‑End Treasury Supply Shock: TreasuryDirect announced a $42 bn 10‑year note and a $72 bn 17‑week bill both auctioning on 12 Aug 2026 (TreasuryDirect). The simultaneous large‑scale issuance is expected to lift the 10‑year yield and widen spreads across the curve, reinforcing the upward pressure observed on the 30‑year Treasury at 5.25%.

What to Watch

Key intraday catalysts include the US CPI release (consensus 0.2% MoM, 3.3% YoY) which will test whether inflation remains sticky; a break above 4.70% on the 10‑year Treasury could trigger a sell‑off in risk assets and strengthen the dollar. The Bank of Canada’s upcoming policy‑rate decision on 13 Sept 2026 will be guided by the newly published schedule; a surprise rate hike would push the 2‑year yield above 4.6%. In the UK, the next ONS business‑investment update (expected early September) will confirm whether the investment slowdown persists. Finally, the RBA’s next meeting on 13 Sept 2026, with cash rate unchanged at 4.35%, will be watched for any forward guidance that could move the AUD/JPY carry trade. The open question remains: will the fresh Treasury supply and sticky US inflation together force a more aggressive Fed tightening path?