EUROPEAN FIXED UPDATE: Contained trade into US data and Wednesday's Fed, modest moves to supply & data

USTs: U/C, 113-15

• Flat, awaiting the FOMC on Wednesday, but before that, we have a Tier 1 release in the form of retail sales. Expected at +0.2% M/M in August (prev. 0.5%), while the ex-autos measure is seen rising +0.4% M/M, matching the July reading, and the Retail Control group is seen +0.4% M/M (prev. +0.5%).


• Bank of America's monthly consumer checkpoint data notes total credit and debit card spending per household rose by 1.7% Y/Y in August (vs 1.8% Y/Y in July), with seasonally adjusted spending per household +0.4% M/M, the third straight increase.


• Thereafter, issuance in focus with a 20yr Bond auction scheduled. No concession seen in trade this morning, but that could change in the hours ahead.


• Elsewhere, the composition of the Fed remains in focus as Cook will remain on the board for at least the September meeting following a court update. Additionally, White House official Miran has been formally approved and will be partaking in the September meeting


• While interesting, and potentially of note for the vote split, the inclusion of the two officials will not change the outcome which is almost certainly going to be a 25bps cut, with markets currently implying a 5% chance of a larger 50bps move.


• Currently, USTs reside in a very thin 113-11 to 113-16 band.

Bunds: +5 ticks, 128.78

• In-fitting with peers throughout the European morning. Gapped higher around the cash equity open, seemingly as a function of the pressure seen in the equity space around this point. However, as the magnitude of that eased, the strength in EGBs also pared.


• At most, it reached a 128.90 peak with gains of just over 15 ticks. Currently, holding around 10 ticks off that but still at the upper-end of a 128.58 to 128.90 band.


• German ZEW for September was mixed. Economic sentiment came in above consensus and seemingly spurred some modest pressure in Bunds with financial market experts cautiously optimistic. However, the current situation has deteriorated amid ongoing US tariff concern and into the German fiscal reform window. As such, Bunds quickly retraced that pressure and are back to pre-release levels.


• The docket ahead is dominated by US events (see USTs) but for Germany, we do have a EUR 4.5bln Bobl auction due.

Gilts: +4 ticks, 91.51

• No significant follow-through from the morning’s jobs data. Overall, the release was broadly in-line with consensus with the labour market continuing to cool though the pace of this is seemingly beginning to slow.


• While the continued slowing is arguably a dovish sign, it is counteracted by the (as expected) uptick in wages, which remain at levels likely inconsistent with inflation sustainably settling at target over the medium term. Note, the next CPI release is Wednesday, where the headline Y/Y is expected at 3.8% (prev. 3.8%).


• Market pricing for the BoE was not impacted by the series. Markets pretty much entirely price an unchanged outcome this week, 97% implied probability of the Base Rate being held at 4.00%.


• Supply was soft. A sub-3x cover and a chunky tail, reminiscent of the auction before last. Results of this sent Gilts lower by just under 10 ticks, but comfortably within existing parameters.


• Gilts opened the morning unchanged from Monday’s close at 91.47, before briefly dipping to a 91.41 low and then retracing to a 91.57 peak, a high that printed in the run-up to the discussed auction. As it stands, the benchmark remains in that narrow range but is now a few ticks firmer on the day, even given the post-supply pressure.

16 Sep 2025 - 10:15- Fixed IncomeData- Source: Newsquawk