EUROPEAN FIXED UPDATE: Early Challenger lifted USTs to a session high, Gilts await the BoE

USTs: +5 ticks, 112-15

• Contained overnight as newsflow at the time was relatively limited and participants awaited a packed docket of Fed speak, texts are expected from Williams (voter) and Paulson (2026).


• Spent the morning near enough unchanged and just above the 112-10 session low. Thereafter, a bout of support was seen for havens generally around the European cash equity open; potential drivers include the Israeli comments on Egypt.


• Thereafter, the docket ahead was lightened by an early release of October’s Challenger job cuts. Printed at 153k (prev. 54k), to a seven-month high. This added to the modest strength seen in USTs and took them to a 112-18 high with gains of eight ticks at best. A print that has added a little bit of dovishness back into Fed pricing, though the odds of a 25bps cut in December remain at around 65% after losing the 70% handle yesterday following ADP and ISM Services.


• Markets see more job market indicators today via the Chicago Fed BLS unemployment forecast and the latest Revelio statistics.


• As was the case around ADP on Wednesday, the data will be assessed in the lens of the December policy announcement and the hawkish tone Powell took in the press conference.

Bunds: +9 ticks, 129.13

• Initial action was similar to that outlined above in USTs.


• Bunds spent the first part of the day holding near enough unchanged and just above the 129.03 opening mark. Thereafter, a pickup occurred around the European cash equity open before a 129.18 peak printed alongside Challenger; again, detailed in USTs above.


• Prior to this, an interesting speech from ECB’s Schnabel, where she said there are factors that are suggestive of tilting the structure of the ECB’s portfolio towards shorter-dated assets. While there was not any move in Bunds or elsewhere on the German curve to this and there is nothing in her speech indicative of an actual change to the BoE’s approach, QT and balance sheet related commentary from the ECB will now garner even greater attention than normal.


• Construction PMIs passed without impact this morning. Ahead, traders look to the referenced US events before remarks from ECB’s Nagel and Chief Economist Lane; particularly regarding the ECB’s portfolio, in light of Schnabel.


• No move to supply from Spain and France this morning. Overall, the auctions were well received with the long-dated French metric in particular garnering strength, a welcome sign amid the ongoing political turmoil.

Gilts: +6 ticks, 93.21

• Opened firmer by around 15 ticks and then quickly extended a handful more to a 93.33 high, a move that acknowledged the modest bullish action seen at the time, as outlined above.


• Price action for Gilts was a little more pronounced than that seen in peers, nothing too significant behind this but potentially a function of the relative underperformance seen in Gilts vs Bunds for much of Wednesday and/or positioning into the BoE.


• The BoE is expected to maintain the policy rate at 4.00%, though the decision will almost certainly be subject to dissent; expectations are broadly for either 7-2 or 6-3, however a split where Governor Bailey has to cast the deciding vote cannot be ruled out.


• Today’s meeting is an MPR and takes a new format, the usual guidance lines are expected to be included (and reiterated), but officials will also have the opportunity to provide a short explainer on their individual vote and considerations around it; in a Bernanke-led effort to improve communication. Full Newsquawk preview available, as always.


• As the morning progressed the initial strength faded with Gilts now back to just above the unchanged mark, in a 93.10-33 band. After the BoE itself Bailey begins his presser 30 minutes later and then the DMP is published at c. 14:00GMT.

06 Nov 2025 - 10:15- Fixed IncomeEU Research- Source: Newsquawk