EUROPEAN FIXED UPDATE: EGBs firmer while Gilts lead on investment updates, fleeting OAT pressure on Fitch

OATs: +13 ticks, 121.73

• Cut to A+ from AA- by Fitch, Outlook Stable. The primary drivers behind the downgrade were France’s high and rising debt ratio, weak fiscal record and consolidation being hindered by political fragmentation, among other points.


• A downgrade that saw some initial underperformance in OATs, lower by as much as 17 ticks on the session at a 121.43 trough. At this point, the OAT-Bund 10yr yield spread got to as wide as 81.07bps, a few bps shy of last week’s high. Overall, the action is notable but nothing disorderly or at risk of sparking contagion to peers.


• We now await DBRS (AA, negative) on September 19th, Scope (AA-, Stable) on September 26th and most pertinently Moody’s (Aa3, Stable) on October 24th followed by S&P (AA- negative) on November 28th.


• Elsewhere, PM Lecornu has already begun taking action. He has undone Bayrou’s plan to remove two public holidays. Lecornu is set to begin meeting with the leaders of other political parties this week, the main focus will be his meeting with Socialist Party leader Faure. Ahead of this, Politico reports that the PM is “not setting any red lines”.

USTs: -2 ticks, 113-07

• A softer start to a week headlined by the FOMC. Before that though, newsflow focuses on the appointment process for Miran, who looks set to be eligible to partake in this week’s meeting, assuming the votes progress without incident.


• That aside, officials from China and the US have begun the second day of talks in Spain. A lot of the focus has been on TikTok while overnight the FT reported that the lack of progress in US talks with China on tariffs and fentanyl is said to have reduced the chances of a Beijing summit. Most recently, China's Market regulator is continuing its antitrust investigation into NVIDIA; an update that hit the risk tone and lifted USTs back to a 113-08 high.


• Ahead, aside from updates on the above, we look to the NY Fed Manufacturing series for September. The survey follows a soft prelim. UoM release on Friday.


• Currently, USTs find themselves in the red though off lows, in part thanks to the above NVIDIA update. At the upper end of a 113-02 to 113-08 band.


• If the pressure returns in earnest, we look to 112-28 from September 5th. On the flip side, 113-18 was the peak on Friday.

Bunds: +18 ticks, 128.73

• In the green, by just over 15 ticks at best. While firmer, the 128.73 peak is someway shy of Friday’s 129.09 best which, in turn, is someway below last week’s 129.44 peak.


• Specifics a little light so far, aside from discussed updates on the trade front and continued scrutiny over Russia’s drone activity around Eastern European nations (see Commodities).


• For Germany specifically, August WPI came in at 0.7% Y/Y (prev. 0.5%), Destatis highlights that this is primarily due to higher prices for food, beverages and tobacco products. Elsewhere, exit polls from NRW in focus as Chancellor Merz’s CDU won with 34% of the vote, while support for AfD tripled to 16.5%.

Gilts: +14 ticks, 91.38

• Marginally outperforming into a week packed with UK data and then the BoE on Thursday. At best, higher by 17 ticks in a 91.14 to 91.41 band.


• Specifics are a little light since the Gilt open. However, newsflow beforehand was focused on various investment details with the Government announcing over GBP 1.25bln of inward investment from US firms, a deal for SNRs involving Centrica and a GBP 1.1bln maritime scheme; all ahead of this week’s US state visit by President Trump.


• Elsewhere, The Sunday Times reports that Chancellor Reeves intends to scrap VAT on energy with all options on the table for a budget giveaway to ease the cost of living situation.


• Despite the extra costs of the VAT update, markets have thus far run with the pro-business reports outlined above, investment that appears to be driving the morning’s marginal outperformance.

15 Sep 2025 - 10:05- Fixed IncomeEU Research- Source: Newsquawk