EUROPEAN FIXED UPDATE: Contained trade into a limited US docket

JGBs: -8 ticks, 135.76

• Initially firmer and got to a 135.99 peak before pulling back to a 135.70 trough after a weak auction, posting downside of 14 ticks at most.


• The 10yr JGB tap saw a relatively soft cover of 3.34x (prev. 3.92x), following a recent 2yr outing that featured the lowest cover ratio since 2009.


• No significant move thereafter to BoJ’s Uchida, though his positive lens on the Tankan survey underscores the narrative that a hike at the October meeting is the more likely outcome as things stand; reminder, LDP election this weekend could change the narrative.

USTs: +6 ticks, 112-29

• Contained in a very narrow range. Specifics unsurprisingly light with the US government shutdown still underway, rating agencies and others have commented on the situation highlighting the prevailing view that the short-term implications aren’t dire, but the shutdown could hit growth if it continues.


• Furthermore, the shutdown means Weekly Claims, Factory Orders (Aug) and Durable Goods Rev. (Aug) will not be released today and as such Challenger Layoffs are the main print. Note, the Chicago Fed will be releasing its September labour market update, which includes a forecast of the BLS unemployment rate.


• The Chicago Fed advanced September series, released September 23rd, estimated the BLS unemployment rate at 4.32%. For reference, consensus for the now-cancelled BLS report this Friday was a 4.3% (prev. 4.3%) unemployment rate, with a range of 4.3-4.4% from survey respondents. The current advanced Chicago Fed model ascribes a 27.7% chance to a 4.3% print, 24.4% probability for 4.4% and 18.9% odds of 4.2%. Data is scheduled for 13:30BST.


• Currently, USTs chop around the unchanged mark in a 112-25+ to 112-30+ band, entirely within but at the upper end of yesterday’s 112-12 to 112-31 parameters.

Bunds: +4 ticks, 128.63

• A slightly softer start to the day, owing to the strong performance of European equities this morning (see Equities for more). However, magnitudes are thin with Bunds lower by 11 ticks at most in 128.48 to 128.67 parameters, within yesterday’s wider 128.24 to 128.76 band.


• Specific so far fairly light, supply from Spain was once again slightly softer than we are used to seeing across the shorter dated lines, but no spillover was seen. France thereafter was mixed/softer vs the last outing, but still strong enough overall.


• While no real reaction to the taps, as the morning’s issuance docket is now behind us some modest upside has been seen across EGBs generally, but within existing parameters.

Gilts: -1 tick, 90.90

• Marginally softer, but essentially flat in a very thin 90.83-97 range, within Wednesday’s slightly more expansive 90.54-91.08 parameter.


• A few updates ahead of the Autumn Budget around IPOs and the treatment of supermarkets and retailers with regards to property taxation, but nothing that fundamentally shifts the fiscal narrative for Chancellor Reeves.


• DMP saw an uptick in the one year ahead CPI view to 3.4% (prev. 3.1%) while the three year view was maintained at 2.9%.


• Supply from the UK was ok on face value and spurred no immediate reaction; however, the cover is the lowest since 2022 for a 10yr tap. A point of focus with shorter dated debt under enhanced focus given the skew by UK fiscal and monetary authorities away from the long end.

02 Oct 2025 - 10:15- Fixed IncomeData- Source: Newsquawk