EUROPEAN FIXED UPDATE: Benchmarks firmer but off Ifo highs

USTs: +1 tick, 112-28

• A slightly firmer start to the day, though once again ranges are thin and US specific newsflow is light.


• Currently, USTs hold near the top end of a 112-28 to 113-00 band. Just about eclipsing Tuesday’s 112-30+ peak and last week’s best, which was a tick above that.


• After the deluge of speakers yesterday, today’s docket is a little quieter but does feature remarks from Fed’s Daly (2027) where we expect text and a Q&A. Before that, the week’s supply continues with 5yr notes due after Tuesday’s 2yr sale, an auction that was ok overall but did show a cooling of demand.

Bunds: +10 ticks, 128.28

• A contained start for Bunds, firmer by a handful of ticks but also in a thin range with newsflow at the time light and largely digesting leaders remarks on the defense/Ukraine front after Trump’s language yesterday, language that took even Ukraine by surprise.


• The main update was Ifo, a surprisingly weak release with conditions and expectation printing below the forecast range. Metrics lifted Bunds by around 10 ticks in the minutes after and since have helped lift it to a 128.40 peak and also propped up peers across the board as well.


• Outside of Germany, France is in focus as PM Lecornu has suggested he would be open to a tax on the top earners and firms. Commentary that is potentially an olive branch/concession to the Left, and particularly the Socialist Party (PS), which wants to significantly limit the deficit reduction measures from the EUR 44bln Bayrou planned to around EUR 22bln. Further, the bulk of that EUR 22bln would, as far as PS is concerned, ideally be attained via a 'super rich' tax.


• No indication just yet from the Socialists on this remark, and thus far OATs trade in-line with their German counterpart. As a reminder, Lecornu is scheduled to present his 2026 fiscal plans on October 13th.

Gilts: +19 ticks, 91.11

• Outperforming peers, in a continuation of the strength seen yesterday after poor PMIs and despite soft supply. At a 91.28 peak, but for the most part holding around the midpoint of 91.12-91.28 parameters.


• UK docket relatively light, supply was unremarkable from the UK, strong enough to keep the benchmark comfortably in the above range. Follows the soft tap on Tuesday, where a chunky price tail sparked notable pressure.


• Press remains focussed on the budget as more think tanks and other groups offer recommendations as to what Chancellor Reeves should do. Overall, the narrative from such groups is that significant tax cuts are inevitable and as such Reeves may need to break the manifesto pledge around them, in order to raise sufficient funds to cover the gap and avoid having to come back


• More generally, Pimco’s Balls spoke to the FT and outlined a view that there is “nothing special” about UK price pressures and as such inflation will fall enough to allow the BoE to cut more than currently expected. Looking for inflation to be near target by end-2026 and allow the BoE to move the Bank Rate closer to Pimco’s 2.75% neutral estimate.

24 Sep 2025 - 10:20- Fixed IncomeEU Research- Source: Newsquawk