EUROPEAN FIXED UPDATE: Bunds briefly bolstered by NATO remarks. Complex awaits US data and supply

OATs: +5 ticks, 121.91

• A contained start for OATs. Largely unreactive to President Macron appointing a new PM, Sebastien Lecornu. His appointment has drawn huge criticism from the Right while those on the left, and particularly the Socialist Party (PS), haven’t been quite as animated, but still see the appointment as Macron going down a “path in which no Socialist will participate”.


• Macron’s appointment may be enough to shore up support from Les Republicans (LR), the party that is thought to have been behind the weak showing of ‘for’ votes for Bayrou on Monday. As such, Lecornu may be able to firm up the central alliance. But, it remains to be seen if he can court support from the Left (the Right is, currently, out of the question); as such, PS’s Faure is the one to watch.

USTs: -2 ticks, 113-09

• Softer, but only marginally. In a very thin sub five tick range which itself is almost entirely in yesterday’s 113-07 to 113-20 band. The session ahead is theoretically headlined by PPI and then followed by supply; though, geopolitical events may take precedence.


• PPI is expected to remain unchanged at +3.3% Y/Y in August; the monthly rate is seen rising +0.3% M/M from 0.9% prior; core PPI is expected to ease to 3.5% Y/Y (prev. 3.7%), with the monthly rate also seen rising 0.3% M/M vs a prior 0.9%.


• Supply is a 5yr tap, follows Tuesday’s 3yr auction which was well received overall though direct demand was a little soft.


• As mentioned geopols may well dominate the session with Poland (see Bunds) and Doha in focus; on that, Trump said the attack by Israel does not further the interests of Israel or the US.


• That aside, a US judge has ruled that Fed’s Cook cannot be fired for now, this means she will be partaking in the September FOMC policy announcement.

Bunds: +20 ticks, 129.23

• A firmer start, propped up by some risk premia amid the overnight drone incident in Poland. In brief, several Russian drones entered Polish airspace and were intercepted by Polish defence systems. An incident that has since concluded, but Poland has referred the matter to NATO.


• We are now waiting to see what the response by NATO formally is, but the initial take appeared to be that as the incursion is not being treated as an attack.


• Nonetheless, Bunds hit a 129.44 peak amidst the NATO commentary, briefly posting gains in excess of 40 ticks on the session.


• Ahead, aside from US events, newsflow will likely focus on updates from NATO, Poland and/or Russia. In the meantime, supply is due from Germany and into the tap Bunds have retreated back to just below Tuesday’s 129.28 peak.

Gilts: +7 ticks, 91.43

• Marginally firmer in quiet trade with UK specific catalysts light and focus on the above events.


• For the UK specifically, the FT reports that PM Starmer’s "Budget board" is set to meet weekly and has been tasked with coordinating pro-growth policies in the run-up to the November 26 Budget and with keeping business and City leaders engaged.


• Gilts firmer by 20 ticks at most, lifted alongside the discussed Bund move, but have since reverted back to gains of just a handful of ticks in 91.36 to 91.58 parameters. Note, no real move on the morning’s DMO sale.

10 Sep 2025 - 10:15- ForexEU Research- Source: Newsquawk