EUROPEAN FIXED INCOME UPDATE: a mixed/steady picture as markets await further guidance from a slew of Fed officials

USTs: -2 ticks, 112-19

• A contained start to the session for benchmarks as we await a packed afternoon and evening of US events.


• Firstly, weekly jobless data is scheduled and expected to rise to 235k (prev. 231k) while continuing claims, coincide with the BLS window for September, are seen lifting to 1.935mln (prev. 1.92mln). Last week’s better-than-expected claims (231.0k vs. exp. 240k) spurred a hawkish reaction, hitting USTs by around a full point over the course of one hour.


• Thereafter, attention turns to the day’s numerous Fed speakers with texts not expected from the officials though some of them are partaking in Q&As. The full list is: Barr, Bowman, Daly, Gooldbee, Logan, Miran, Schmid & Williams.


• Into the officials and data, markets currently ascribe around a 90% chance of a cut at the October gathering and look for 108bps worth of easing by end-2026.

Bunds: +5 ticks, 128.24

• Firmer but holding in a very narrow 128.09 to 128.34 band, upside came as the European risk tone deteriorated. Specifics for the bloc are a little light so far, no read across from the SNB policy announcement to fixed benchmarks (see FX for more). Additionally, the morning’s EZ M3 and loan data passed without incident.


• Focus on the above US docket, but alongside that, attention is on political matters in France. As PM Lecornu is reportedly to unveil his first "budgetary guidelines" today, via Politico citing sources; will be posted in La Parisien, online at "the end of the day".


• As a reminder, Lecornu provided an olive branch to the Left on Wednesday when he suggested he would be open to a tax on the top earners and firms. We don’t yet know the details of Lecornu’s guidelines, but any such concession to the Left would be a potential positive sign on the road to fiscal reform; however, the Left will undoubtedly want greater concessions and it remains to be seen what appetite the market and Lecornu have for them.


• Currently, OATs trade broadly in-line with EGB peers. The key OAT-Bund 10yr yield spread widened a touch yesterday to just under 83bps and while it remains around that level today, it has not extended further.

Gilts: -14 ticks, 90.96

• A slightly softer start to the session, following the bias from peers at that point in time. However, Gilts have not been able to follow the very modest pick up seen in EGBs across the morning. Potentially a function of the slight relative outperformance seen in the first half of the week or as we look at the day’s supply docket.


• UK auctions this week have seen robust b/c, however the actual demand at the taps has been weak which, alongside the very chunk tail seen on Tuesday’s outing, has increased focus on supply. Today’s sales were short-term tenders and in focus in case they showed a decline in short-term demand, a point that would have been concerning given the skew away from the long-end to the short-end undertaken by UK officials with respect to their bond activity.


• Today’s first tender passed without incident, with a 2.9x cover strong enough to prevent a sell off but not sufficient to break the modest bearish trend that has been in play this morning.

25 Sep 2025 - 10:20- Fixed IncomeData- Source: Newsquawk