EUROPEAN FIXED UPDATE: Awaiting PCE & Fed speak

Bunds: +9 ticks, 128.09

• A contained start to the day as we look to US data and Fed speak (see USTs). Bunds spent the morning towards lows of 127.89 before picking up modestly as the general risk tone came off initial highs. Action that has taken the benchmark to a 128.11 peak, but with gains of around 10 ticks at best.


• No move to the latest ECB Consumer Expectations Survey. The one and five year inflation views were increased while the three year horizon was maintained.


• The above aside, newsflow focussed on the latest US tariff measures though the read across for fixed income has, thus far, been limited.

USTs: U/C, 112-11

• In a very thin 112-07 to 112-13+ band awaiting a packed US docket.


• Headline PCE is seen at 0.3% (prev. 0.2%) M/M with the core at 0.2% (prev. 0.3%) M/M, following PPI and CPI desks looked for the core figure between 0.28-0.35%. This week, Fed Chair Powell said the latest available data indicate that headline PCE prices rose 2.7% Y/Y over the 12 months ending in August (his view is in line with the consensus), while core PCE prices are likely to print 2.9% Y/Y (again, in line with the consensus).


• Within the data, participants will be attentive to any early signs of a reacceleration in the core figure. Barclays wrote that "with a core PCE inflation likely to print around 0.21% M/M for August, such projections imply that the median FOMC participant expects core PCE inflation to accelerate to around 0.27% M/M from September to December, likely as a result of tariffs.".


• Ahead of this, markets currently imply around an 87% chance of a cut in October with 101bps of easing seen by end-2026; note, this dropped from around 107bps at this time on Thursday, due to yesterday’s GDP revision and claims.


• Fed speak thereafter from Barkin (2027) and Bowman (voter), followed by the latest AtlantaFed GDP Now, at 3.3% for Q3 as of September 17th.

Gilts: -1 tick, 90.50

• UK specifics are very light so far. Domestic politics is increasing in focus as PM Starmer comes under increasing pressure from figures within the broader Labour Party. On this, next week’s party conference will draw significant attention, but before that at 11:00BST, Starmer will be speaking on "patriotic renewal”.


• That aside, Gilts likely to conform to the lead from USTs given the busy afternoon of US events. As it stands, the benchmark is near enough unchanged in 90.26-52 confines.

26 Sep 2025 - 10:05- Fixed IncomeData- Source: Newsquawk