EUROPEAN FIXED UPDATE: Initially hit by the US risk tone, EGBs then slipped on German data, no reaction to the deteriorating European tone

USTs: -4 ticks, 112-22

• A contained start to the session but there is a modest bearish bias owing to the slightly constructive trade in US equity futures, though magnitudes are modest.


• A lot of Fed speak in recent trade. This morning, Williams spoke at an ECB conference, discussing reserve management bond buying as a technical operation. Overnight, Fed’s Barr (voter) outlined progress on inflation but made clear that there is still work to do; Miran (voter) reiterated a call for 50bps moves and once again said 75bps increments would be too much; Hammock (2026) stuck to her hawkish credentials, outlining that another cut is “not obvious” in the current inflation situation.


• Ahead, we have remarks from Miran (voter) once again and Jefferson (voter). Jefferson, the more interesting of the two, as he generally has a dovish stance, so it will be pertinent to determine if his bias remains the same or has moderated, in the context of Powell’s hawkish press conference. Jefferson last spoke at the start of October and said that while not having BLS data was less than ideal, there was enough information to do the job and was confident in reaching the inflation target.


• Thus far, USTs in a 112-22 to 112-28 band notching downside of just 4+ ticks at most, comfortably within Thursday’s 112-10 to 112-30 confines.

Bunds: -14 ticks, 129.04

• Also experienced a slightly softer start to the day, as outlined above.


• Early doors, a strong set of German trade data for September sent Bunds to a 129.02 low. A strong series that bodes well for the German recovery narrative and follows on from a rebound in industrial production data for the September period (as expected). Nonetheless, the narrative for Germany remains one of structural weakness, but with some signs of a recovery emerging.


• Since, the move has extended marginally to a 128.99 base, matching the trough from Thursday and in reach of Wednesday’s WTD 128.96 low.


• ECB’s Nagel due once again today (no guidance re. a text), followed by Elderson (no text release expected).

Gilts: -30 ticks, 93.10

• Opened on the backfoot, posting losses of just over 10 ticks before slipping further to a 93.10 low. If the move continues, we look to Thursday’s 93.03 WTD base. The pullback today comes after the upside seen on Thursday by the BoE, as while desks are aligning around a December cut as being the emerging base case, that view is contingent on the two sets of data and budget due before the December meeting.


• BoE’s Bailey due to speak once again today, though he is unlikely to add much vs his presser and subsequent media rounds on Thursday; full Newsquawk review available on the headline feed.


• Elsewhere, the budget remains in focus and an increase to income tax is now very likely following a Times article that Chancellor Reeves has reportedly told the watchdog she intends to increase the measure. She is reportedly considering a 2p increase to income tax and a 2p cut to NI, echoing reports on the weekend that suggested as much, in a bid to move the burden away from workers and onto other groups.


• Pertinently, the NI cut limit is potentially to be set at GBP 50k, i.e. those earning more than that will be hit by the income tax increase and will not benefit from the NI cut; a move designed to keep the burden on those with the “broadest shoulders”, but a tweak that could possibly be scored as a growth-negative by the OBR.

07 Nov 2025 - 09:55- Fixed IncomeEU Research- Source: Newsquawk