EUROPEAN FIXED INCOME UPDATE: Global benchmarks (ex-JGBs) remain soft post-FOMC

USTs: -2 ticks, 112-27

• A softer start to Thursday for USTs. The benchmark is holding around the post-Powell lows, but did briefly drop to a 112-22+ base, taking out the 112-24 trough from Wednesday.


• In brief, the Fed cut by 25bps, a decision subject to 50bps and U/C dissent. They also announced a decision to exit balance sheet reduction, as part of this, the MBA unwind will continue, but offset by T-Bill purchases as/when necessary. The bulk of the action came from Powell, who was hawkish regarding the near term path of policy, outlining that there is a growing chorus of feeling they should maybe wait a cycle, in terms of continuing to ease.


• The Powell-presser weighed on USTs and caused the US yield curve to bear-flatten. This morning, the curve is bear-steepening and very marginally unwinding the action seen late Wednesday. Market pricing implies 18bps of further easing by end-2025, vs the c. 21bps priced pre-Fed, 23bps post-Fed, but just off the c. 16bps low seen in the immediate aftermath of Powell.


• Ahead, we have Fed’s Bowman (voter) and Logan (2026) scheduled, though Bowman is pre-recorded and Logan is on bank research; remarks should not cover current policy as the Fed is technically still in the blackout period until the end of Thursday. Friday’s docket has Logan, Bostic (2027) and Hammack (2026). Additionally, we will await the dissent letters from Miran (voter) and Schmid (2025) who preferred 50bps and U/C respectively.


• Since, newsflow has been focussed on tariffs. The mentioned 112-22+ base this morning came alongside a readout from China’s Commerce Ministry on the Trump-Xi meeting, a meeting POTUS described as a 12/10, the readout from China confirmed that the US is extending the suspension of 24% reciprocal tariffs for one year.

JGBs: +38 ticks, 136.18

• The Fed weighed on JGBs on Wednesday, to a 135.78 low into the close. Thereafter, JGBs picked up a touch following the BoJ. The decision was unchanged as expected, subject to two hawkish dissenters. However, modest upside was seen in JGBs after the statement as it did not contain any overtly hawkish signals.


• Specifically, this lifted JGBs above the 136.00 mark after the Tokyo lunch break, a move that continued thereafter to a 136.26 peak just before Ueda began.


• In his presser, Ueda didn’t give too much away. He, somewhat unsurprisingly, outlined that the reason for holding off on hiking was due to elevated economic and trade uncertainty; though, he did make clear that it is possible for them to alter policy irrespective of the domestic political situation, specifically referencing to the budget compilation.


• The main market-moving update was Ueda outlining that there is no pre-set idea about the timing of the next hike. A move that spurred some JPY pressure at the time but didn’t have much impact on JGBs.135.79

Bunds: -27 ticks, 129.30

• Hit on the Fed alongside USTs, as outlined above. Early doors, the benchmark held near yesterday’s 129.21 base and then dipped a tick further to the current 129.20 low, a low print that occurred alongside the discussed commentary from China’s Commerce Ministry.


• Thereafter, Bunds lifted in-line with the likes of XAU as the risk tone dipped a touch; evidenced by European and US equity futures moving into the red vs the slightly firmer performance seen before the European cash equity open.


• At most, Bunds to a 129.38 peak but still lower by 19 ticks.


• No move this morning to a much stronger than expected French GDP figure for Q3, while hotter-than-expected Spanish CPI weighed a touch, but EGBs remained well within earlier ranges.


• More recently, the German State CPIs point to a cooler-than-previous Y/Y figure. Though the magnitude is a little unclear given stickiness in North Rhine Westphalia, limited moderation in Saxony and significant cooling in Baden-Wurttemberg. Consensus for the mainland Y/Y, both headline and harmonised, points to a 2.2% (prev. 2.4%) read; again, directionally the regionals chime with this, though the magnitude is perhaps a little clouded.


• Eurozone GDP came in above expectations, printing at 0.2% Q/Q (exp. 0.1%) and 1.3% Y/Y (exp. 1.2%) following the much better than expected French figure and Germany remaining at 0.0% (assuaging some concern around a negative figure).


• Just after the mainland German inflation figure at 13:00GMT we get the ECB policy announcement. The ECB is expected to maintain the Deposit Rate at 2.0%, less than 1bps worth of easing is currently implied. Thereafter, we look for guidance on December which could be a more interesting meeting as the latest economic forecasts will be available; full Newsquawk preview available.

Gilts: -33 ticks, 93.45

• Opened lower by 23 ticks, as the benchmark had yet to react to the Powell-pressure seen in peers. A move that extended by another 20 ticks to a 93.35 low shortly after the resumption of trade.


• Since, Gilts have found a base just below the 93.55 opening mark, posting losses of c. 30 ticks on the session.


• Newsflow for the UK remains focused on the November Budget, amid reports that Reeves is looking at the early scrapping of oil/gas windfall taxes and a potential 2p increase to income tax; the latter would be a manifesto breach. Note, the attention on Reeves herself has intensified owing to her admitting she breached housing rules regarding her family home, PM Starmer has since dismissed calls for an investigation.

30 Oct 2025 - 10:05- Fixed IncomeResearch Sheet- Source: Newsquawk